9 Easy Ways to Hire a Tax Preparer

Tax season is here. Some people procrastinate and wait until the last minute to file their taxes which makes it difficult when trying to find a reputable tax preparer. It can take time to find a good tax preparer but if you wait until the last minute you have limited options and may be charged a higher fee. The average cost ranges from $150 to $300 but can range as high as 1,500.

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Some tax preparers charge by the hour, charge a flat fee for each form used, charge a fee based on the previous year’s fee plus additional charges for any changes, charge based on the complexity of the client’s situation, charge a flat fee for each data entry item and some charge based on a percentage of your refund. Here are 9 steps to hire a tax preparer:

Expertise

When hiring a company verify who will prepare your taxes - an entry level, junior or senior employee. Ask about their experience and the type of clients they have serviced.  If a less seasoned employee is preparing your taxes request that a senior employee review your returns before filing to ensure no deductions were missed and no errors are found. Not everyone is knowledgeable in every area and not everyone will admit that they lack that knowledge because they want to get your business.

Claims

Avoid hiring tax preparers who guarantee a refund or a specific amount, this information cannot be determined until your taxes are prepared. These types of individuals or companies conduct unethical or illegal practices to get large refunds, may charge additional fees and put taxpayers at risk for an audit.

Disclosure of Fees

Ask for disclosure of all fees that can be charged. Inquire about payment methods and installment plans.

Registration

Verify the tax preparer is registered in their state and possesses a Preparer Tax Identification Number (PTIN).  Tax preparers can have different credentials. You have the option of using a Certified Public Accountant (CPA), Enrolled Agent (EA) or Tax Attorney.

Known Companies

Companies can be used such as H&R Block or Jackson Hewitt to prepare taxes. However, these companies may not have tax preparers who specialize in certain areas. These types of companies are best for taxpayers who have common tax deductions, homeowners and those who do not own a business.

Customer Service

Verify their level of customer service by looking up the individual or company on the Better Business Bureau (BBB) website or with your state directory for licensed tax preparers.

File Electronically

Ask if the tax preparer offers electronic filing which spends up processing time and the time to receive a refund.

Obtain Contact Information

Ensure you have the tax preparer’s contact information including first and last name, work and cell phone number and email address if you have questions during or after the tax preparation process.

Guarantee

The tax preparer should guarantee the accuracy of your tax returns and offer to amend your tax return at no cost if an error is made or be willing to represent you during an audit.

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Don't Fall for Tax Preparation Gimmicks

                                                         

According to FranchiseHelp Holdings there are approximately 38,287 tax preparations companies in the U.S. Approximately 144 million taxpayers filed tax returns last year. For several decades large chain tax preparation companies have preyed on low-income neighborhoods, inner-city and rural areas opening offices across the country. These taxpayers were lured into their offices promising to receive quick refunds in exchange for a fee knowing that most of these taxpayers were desperate for money and would jump at the opportunity even though it was a bad choice.

Offices are specifically located in areas where incomes are less than $50,000 or in areas where there are several check cashing stores and liquor stores. These tax preparation companies also lure these taxpayers into their offices with free coffee, snacks, and flat screen televisions in the waiting areas all to get repeat business and increase their profits.

In some instances customers are lied to and confused by the services offered and don’t realize that if they file their taxes online or through a free tax preparation center they can get their refund back in the same time period. These large chain companies are stealing money from low-income taxpayers who need their money the most.

The federal government stopped these large chain tax preparation companies from offering the refund anticipation loan or rapid refund. However, these tax preparation chains found a loophole around. H&R Block now offers taxpayers the gimmick to put your refund on an “Emerald Card” for a $45 fee or to you can get a “paystub loan” where taxpayers get a partial advance on their tax refund in December of January before the taxpayer receives their W-2. The interest charged on this paystub advance is 25% in addition to the fee charged to prepare their taxes.

H&R Block also has a “Second Look” gimmick where they offer to look over your taxes to find errors. When you file taxes the IRS will catch the errors and fix them for you so there is no need to waste time going to H&R Block or any other company.  Jackson Hewitt and Liberty Tax offer similar gimmicks. Jackson Hewitt allows taxpayers to go to Walmart to get their taxes prepared.  You have the following options:

• Get a Walmart prepaid debit card which requires you to load money onto the card for a fee.
• Receive a $10 Bluebird American Express gift card or get your tax refund for free if you get direct deposit
• Get at $20 Walmart gift card if you file your taxes online.
• Get a $50 Walmart gift card if you file your taxes in a Walmart store.

These are all gimmicks to get you in the Walmart store to shop. These companies charge higher prices, are inexperienced, make mistakes, use gimmicks, may not be honest, add a protection clause or an arbitration clause in their contracts which prevents taxpayers from suing them in court.

The alternatives to filing with the tax preparation chains are:

1.      File your taxes using a tax preparation software.

2.      File your taxes by mail.

3.      Hire an accountant or CPA.

4.      If you earn less than $60,000 go to a free tax preparation center by calling 800-906-9887 or using the site http://irs.treasury.gov/freetaxprep/ or use free tax preparation software which can be found on www.irs.gov.

5.      Use IRS Free File if your adjusted gross income is $60,000 or less.

6.      If your income is above $60,000 you can use Free File Fillable Forms available on the IRS website www.irs.gov.

7. Use an authorized tax efile provider which can be found on www.irs.gov.
8. Comparison Shop. Go to at least 3 companies to get price quotes to help you find the best deal.
9. Price match. Ask about price match guarantees that honor competitor prices.
10. Go with your gut. Use common sense. Go with your gut instinct, if you feel like the deal is too good to be true or if you feel like something is not right with the loan, don't sign it.
11. Ask questions. Ask lots of questions; have everything explained to you prior or during settlement.
12. If you still decide to use a tax preparation company and don’t want to pay their fee, you don't have to pay. You can take your paperwork, leave and look for another company to prepare your taxes.

Be wary of people or companies that brag about getting you large refunds, provide guarantees, or offer to get your refund quicker without ever seeing your taxes or knowing anything about you. When looking to hire a tax professional things to consider are:  qualifications, licensed in your state, experience, past references, work hours, professional reputation, trustworthiness, professionalism, professional memberships, your specific tax needs, comfortability and capability. 

Which Tax Professional is Right for You

                                                                                  

 

Many taxpayers are starting to receive W-2 statements, 1099 and other forms in the mail to report income earned in 2013.   Many taxpayers have begun to organize their documentation to prepare to file their taxes as early as this month.  There are many options available for taxpayers to file taxes such as: filing by paper and mailing your returns, filing electronically, hiring a tax professional or doing your taxes yourself. There are so many tax preparation software packages and tax professionals it can become overwhelming and confusing trying to decide which one is best for you. According to FranchiseHelp Holdings there are approximately 38,287 tax preparations companies in the U.S. Approximately 144 million taxpayers filed tax returns last year. 

They are several types of tax professionals: certified public accounts (CPAs), tax lawyers, enrolled agents (EAs) and people who learned how to prepare taxes on their own with or without appropriate education or training.  Prior to preparing your taxes you need to perform an assessment to see what type of tax professional you need or if you can file your taxes on your own using tax preparation software. 

Tax preparation software has all the tax laws integrated into the tool and can be helpful if your taxes are complicated such as running your own business or claiming tax credits or deductions. However, there may be some deductions that you are missing out by using a tax preparation software.

Accountant vs CPA

An accountant has to abide by specific rules and regulations, including Generally Accepted Accounting Principles (GAAP). CPA's are accountants who have passed a licensing examination in a state. All CPA's are accountants, but not all accountants are CPA's. An enrolled agent is not a CPA or accountant. They take classes, pass an exam and earn a certification from the IRS. 

An accountant or CPA can offer suggestions to minimize your tax liability that a tax preparation software may not be able to anticipate or inform you of.  An accountant or CPA can answer any questions you have throughout the year not just during tax time. An accountant or CPA is very familiar with the tax laws and can quickly perform research on a tax issue or question versus spending hours by someone who does not have the same education and training. 

If you are self-employed, have tax credits or deductions, have multiple income streams or investments, are itemizing or owed taxes in the past you should hire a CPA. Ask bank employees, lawyers, co-workers, friends or relatives for recommendations. 

I recommend using a CPA who specializes in tax preparation. Consider hiring a smaller CPA company that focuses on your particular demographic.  Large CPA companies usually focus on corporate taxes, court cases, audits and other complicated tax issues. They charge a higher fee for tax preparation and may not be willing to prepare taxes for an individual.

Tax Preparation Companies

Some tax preparations companies recruit students, stay-at-home moms or retirees to help them during tax season who may not be qualified to prepare taxes. Some may even call them data entry experts. The most popular tax preparation companies are H&R Block and Jackson Hewitt.  Not all employees at these types of companies are CPAs or accountants. Due to this you may miss out on deductions and credits. Mistakes may be made and you may be at higher risk for an audit.

Some tax preparations companies use a similar version of tax preparation software that taxpayers use. They ask clients questions regarding standard tax forms and enter the data.  These companies in some cases overcharge for their services charging per hour while some charge per form.  In some cases hiring an accountant or CPA is cheaper than going to a chain tax preparation company.

If you decide to use a tax preparation company and don’t want to pay their fee, you don't have to pay. You can take your paperwork, leave and look for another company to prepare your taxes.

Some chain tax preparation companies put a protection clause or an arbitration clause in their contracts which prevents taxpayers from suing them in court, and prevents taxpayers from filing a class action lawsuit due to mistakes made.

Avoid chain tax preparation companies that offer to sell you additional productions such as “rapid refunds”, “refund anticipation loans” which comes with a fee. In addition, these methods require approval, are not guaranteed and you are better off using direct deposit to get your tax refund faster. No one can guarantee when you will get your tax return back, not even the IRS.

 If a mistake is made by a chain tax preparation company you may be accountable for the mistake and it may cost you money. However, some chain tax preparation companies may sign your tax returns on your behalf or may offer a service to review your taxes to ensure you are not at risk for an audit - however this should be included in your tax preparation instead of an additional fee.  If you have not been audited it doesn’t mean you never will. The IRS can take up to 3 years to perform an audit or go back further if major issues are detected.

If a tax preparation company offers a short course on how to prepare taxes run. You cannot learn how to efficiently prepare taxes in one day or by taking one course. CPAs have extensive education, have to pass a test and have to keep their license active by taking continuing education classes. 

Be wary of people or companies that brag about getting you large refunds without ever seeing your taxes or knowing anything about you. When looking to hire a tax professional things to consider are:  qualifications, licensed in your state (some tax preparers will prepare taxes even if they are not licensed in your state), experience, past references, work hours, professional reputation, trustworthiness, professionalism, professional memberships, your specific tax needs, comfortability and capability.  

Tax Lawyer

You should hire a tax lawyer if you have received any notices from the IRS to appear in court, a lien or judgment has been filed against you by a tax authority, you owe a large sum of money to the IRS, you are a business owner with partners or investors, you need to raise capital for your business, or you founded a non-profit company.