Wednesday, January 14, 2009

Choosing a tax preparer; Do you need a CPA?

One thing that I have learned in my career is that people hate filling out forms.  It can be the simplest form with basic information and people would still pay someone to fill it out.  

The majority of people have simple tax returns and could fill out the forms themselves.  You could purchase software that helps you fill out the forms by interviewing you with questions such as, did you receive a W-2. If you answer yes, the software will then ask you to type the numbers from your W-2 into the program. The program will put the numbers on the correct tax forms. I will put a shameless plug in for the software I use at Happy Returns Tax Service. It cost $19.95 to $24.95  depending on if you use form1040EZ, 1040A or 1040.  It includes Federal, State and e-file.  It is a bargin compared to some of the software on the market and there are no hidden fees.   

Although many people find the tax software great, I find others who get frustrated with software and rather have someone else prepare their return.  There is a good article by John P Cummings, “How to Choose a Qualified Tax Preparer” on the IRS’s website.   

He does a good job of spelling out the qualifications of a Certified Public Account (CPA) and an Enrolled agent (EA).  A CPA can be very expensive even for a basic return.  In my opinion, many people who have a job and some basic investments like stocks, bonds and mutual funds do not need a CPA.  If you own a business, have multiple rental properties or are in complicated investment like; limited partnerships and stock options, then I would suggest you pay the price for a CPA.  

When choosing a professional to prepare your tax return ask for referrals. Avoid tax preparers that claim they can get you the biggest refunds.  I had clients ask me why there refund was larger the pervious year when prepared by another tax professional.  After reviewing the return, I would state that you gave more money to charity the previous year or you had work done to your home that qualified for an energy credit.  Their response is, “No I didn’t”.   Be careful you are still responsible for the return.  

If you are considered a low- and middle-income taxpayer age 60 or older you may qualify for help from the AARP Tax-Aide program.  It has nearly 32,000 volunteers staffing 8,500 sites across the United States. These IRS certified volunteers provide free tax counseling and preparation services. Visit their free AARP Tax-Aide site locator, where you can enter your zip code and receive location addresses, schedules, and other contact information.

Taxes are a frustrating task for many, but if you can find a true professional or good help it can make all the difference.  Happy tax season.   


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