Tax return preparation takes time. What is your time worth to you? That's a good question to ask when it comes to tax return preparation. According to government statistics, the average 2003 itemized tax return with interest and dividends took 28 hours and 30 minutes to prepare. Surprised?
Each year, federal taxes increase in difficulty and size and every year tax software packages get better, but even using the latest software programs take time. Plus, the outcome is directly related to information being entered correctly by the taxpayer. To save you from stress, the services of a paid professional may be something to consider this year.
Average costs to prepare an individual tax return will likely range roughly from $150 to $450, depending on complexity. Professional preparers must stay informed of tax law changes, are familiar with software issues, and will often find frequently missed deductions. Each year, many tax returns will be impacted by new laws. Tax preparers have equipped themselves and studied to work within the most current guidelines. Often, a consultation with a tax preparer will not only pay for itself, but offer you an opportunity to learn something that will help you provide structure for your personal finances. Many tax professionals are also good financial advisors. However, it most often comes down to the investment of money versus time.
Assess Your Needs
Several elements factor into the type of professional that is best for you. Just as it is not a good idea to hire a contractor or a babysitter without doing some personal and careful investigation, it is never a good idea to hire a tax preparer without doing the same. Just as with everything else, don't base your decision solely on expense. Consider what services are available, as well as how the preparer meets your expectations. These factors will help you to decide where you will receive the most for your dollar.
Hire a Preparer
To hire a tax preparer, consider:
- The difficulty of your return. Do you have such things as the sale of property, investment income, or income from the operation of a business activity to report? You will need a professional that has experience, and can optimize reporting to your advantage.
- Is future financial advice important to you?
- Do you want someone who will also help you out after you file if the IRS has questions or audits your tax return? Is this an included service or an additional charge?
- What is their fee structure and does it make sense? How do they charge? Per form? Flat rate? By the hour? How many hours do they estimate? Which way would you feel best paying?
- Do you feel that you can trust the person you select? This is crucial.
- How long has the preparer been in the tax business?
- What are their credentials and what designations do they have? Do they upgrade their knowledge by meeting continuing education requirements?
- Does the preparer belong to any professional organizations? Belonging to a professional organization suggests a commitment to excellence in his or her chosen field. Professional organizations often offer their members the latest tools needed to enhance business as well as providing a resource for information.
- What do other clients say about the tax preparer? Referrals are great, but it is important to check references too; satisfied customers will attest to reliability. A good preparer will gladly offer references on request.
A professional tax preparer may have a variety of designations, each demonstrating different areas of specialization. The most commonly known designations are (CPA) certified public accountant, (CFP) certified financial planner, and (EA) enrolled agent. Each of these credentials require a varying amount of continued education to maintain the designation.
- A CPA has a college degree and has passed an exam required for certification. CPA's are qualified to prepare books, financial statements and tax returns.
- CFPs specialize to a greater degree in financial planning and assessing individual needs for the future. They may handle investments and advise on planning to help individuals achieve their goals using the most advantageous means available.
- EAs, as well as CPAs and attorneys, are qualified to represent a taxpayer in an audit before the IRS.
Once you have hired the help of a professional tax preparer, it is important that you check to be sure that he or she has signed your tax return before submitting it.
Selecting the right tax professional will save you headaches, time, and often money.
