If someone tells you that they hired an accountant to do their taxes, you might that their tax situation is complex. Many taxpayers can benefit from hiring a tax accountant, and a lot do.
But take some simple steps to protect yourself before you spend your hard-earned cash on a tax professional.
Make sure you find the right accountant for your situation and that you ask certain questions.
Understand Why You Need a Tax Accountant
Take some time to identify exactly what it is you want an accountant to do for you. Here are some common reasons why you might need one.
- Preparing your own taxes is time-consuming, stressful or confusing.
- You want to make sure your tax returns are accurate.
- Your tax situation is pretty complex, perhaps because something changed this year, and you need specialized advice and tips.
- You want detailed tax planning advice going forward.
- You are facing a tax problem such as filing back taxes, paying off a tax debt or fighting an IRS audit.
- You’ve started a business, invested in the stock market, bought rental property, or you’ve moved outside the U.S.
Finding a Tax Accountant
You’ll want an accountant who has experience dealing with tax situations similar to your own.
If you’re being audited, you don’t want someone who has never handled an audit before.
Here are tips for finding a professional with the specialized tax expertise you need. Remember that you, not the accountant, are ultimately responsible for the information included on your tax return.
- Referrals are your best bet. Ask everyone you can think of for recommendations: family, friends, business owners, financial advisors and attorneys. It can be particularly helpful to ask someone who has a tax situation that’s similar to your own. If you ask another professional such as a financial advisor or an attorney, explain why you’re looking for an accountant and what you want him to do for you. This will help them steer you in the right direction.
- Be wary of an accountant who promises you big refunds or that says you can deduct everything under the sun.
- Don’t be afraid to shop around or to change accountants if you’re not satisfied or comfortable.
- Local, independent firms often specialize in the tax needs of individuals and small businesses, but ask if the firm has the expertise to handle your taxes if there’s anything unique about your situation.
- Retail tax franchises like H&R Block, Jackson Hewitt and Liberty Tax Service offer competent tax service if you just want to file a relatively straightforward tax return. You can sometimes even find certified public accountants (CPAs) and enrolled agents (EAs) working in these offices. Ask if you can meet with a CPA, an EA or a senior tax preparer. You’ll usually pay the same price, but you’ll get to work with a seasoned professional.
It can help to understand the difference between different types of tax professionals, too.
- Enrolled agents have passed rigorous testing and background checks administered by the IRS. EAs often specialize and are best for complex tax situations. They can represent you before the IRS if you’re dealing with an audit or collections.
- Certified public accountants have passed the rigorous CPA exam and are licensed by the state in which they work. CPAs often specialize in an area specific to accounting. Some CPAs specialize in tax accounting, but not all CPAs handle tax issues. A CPA can also represent you before the IRS if you’re dealing with an audit or collections.
- Tax attorneys are lawyers who have chosen to specialize in tax law. They often have a master of laws degree in taxation (an LL.M.) in addition to the required juris doctor (J.D.) degree. Attorneys are best at complex legal matters, such as preparing estate tax returns or taking your case before the U.S. Tax Court.
Questions to Ask
Tax professionals are subject to various federal and state regulations. Asking these questions can help ensure that you find someone who is experienced and trustworthy.
- What licenses or designations do you have?
- How long have you been in the tax business?
- What tax issues do you specialize in?
- What are your fees?
- Do you outsource any of your work or do you perform all the work personally?
- Approximately how long will it take you to finish my taxes?
- Do you believe that I’m paying too much, too little, or just the right amount of tax?
After your interview, you’ll want to perform a quick background check. Contact your state’s board of accountancy to check the status of a CPA’s license or to find out if any disciplinary action has been taken against him. You can ask the IRS Office of Professional Responsibility if an EA has been censured, disbarred or subjected to other disciplinary action.