Prepare for Taxing Decision - TheStreet

Before March Madness kicks in and you spend your weekends updating your tournament brackets,figure out how you're going to get your tax return done.

Are you going to do it yourself or do you plan on hiring someone?

Please, be realistic.

If you have no interest in doing it yourself, then don't even bother buying the taxpreparation software. Just find yourself a qualified tax preparer and send over your tax materials pronto.

If you think you can do it, don't wait until the midnight hour. For some unexplained reason,things that are supposedly so simple always take twice as long. So leave yourself some time.

While we can't tell you whether to go pro or software, we can help you think through thedecision-making process so that your tax return is completed with accuracy and efficiency.

Do You Need a Pro?

"Using tax software is a great way to go for most people," says Rande Spiegelman, vice president offinancial planning at the Schwab Center for Investment Research.

As long as you just have W2 wages and a few 1099s from, say, interest and dividend income, theinterview process on the tax preparation software is sophisticated and accurate enough to get youthrough it.

If your return has more complicated issues, like big charitable deductions, casualty losses orloads of miscellaneous itemized deductions (from job-hunting or other work-related expenses), thesoftware programs will ask you enough questions to cover all these topics. You just have to bepatient enough to answer them all. In that case, you'll still do fine with the tax prep programs.

But if you run your own business, receive equity compensation like incentive stockoptions, or are involved in intricate investment strategies like short-selling, you probablycould benefit from the help of a pro.

In addition, anyone who has an alternative minimum tax situation or is considered to have ahigh net worth should consult a professional. Those issues are very complex and may just be toomuch for you and your tax software.

"You just can't be as proficient as people that do it all the time," says Bart Fooden, CPAand president of his own firm in Woodbury, N.Y.

So How Do You Pick a Pro?

There are plenty of people out there vying for your business, so make sureyou do your due diligence.

First, understand the acronyms.

An enrolled agent, or EA, is a tax professional licensed by the IRS. Uncle Sam does backgroundchecks on all EAs once they pass this big IRS tax test. If you just want your taxes prepared,these folks will get the job done.

A certified public accountant, or CPA, has an accounting degree, passed a rigorous exam andworked under another CPA for a few years before becoming licensed. If you have a complicatedsituation or are looking for a long-term tax plan, you probably should consider a CPA.

Now, where do you find these people?

If you pop into any

H&R Block

(HRB) - Get Report

or Jackson Hewitt, you'll find loads of tax preparers who aretrained in-house, but don't have to be either EAs or CPAs.

These places are the fast-food restaurants of the tax world. Show up with your stuff andthey'll turn around a tax return for you. So if your return is straightforward and you have nointerest in trying to tackle it yourself, these places are perfect for you. Expect to pay anywherefrom $150 to $450 per return.

If your situation warrants a CPA, then get some referrals. "Word of mouth is always your bestbet," says Fooden. Ask your friends and colleagues if they like their tax accountants. How long have they been with them? And how quickly do they return phone calls?

Or search the Web for your state's society of CPAs or EAs. The sites should offer a searchfunction to help you locate a CPA or EA in your area.

Then interview your potential tax preparer. If you have a small business,make sure the CPA has experience with your issues. If you've exercised incentive stock optionsthis year, be sure to discuss that during your interview process.

Keep in mind, just because a person is a CPA does not mean he knows taxes. Many CPAs arefabulous full-time auditors and have never even picked up a tax return. So be sure to ask.

Most importantly, you have to be comfortable with this person. There is a huge trust factorhere because, in some situations, your preparer will know more about your financial situation than maybe even yourspouse.

Choosing a small firm or a large one will depend on your needs. With a one-person shop, you'rerelying on an individual to know all the answers. A larger firm has many more resources availablefor your complicated issues.

Of course, the larger the firm, the larger the bill. A small shop will generallycharge around $500 to start, says Fooden.

Most firms charge either by the hour or by the schedule. So if the firm charges hourly and youbring in a shoebox full of tax documents, be prepared for a hefty fee. If the firm charges by theschedule, then each form has a price tag. For instance, preparing just a Form 1040 might cost,say, $100 and each additional schedule will be another $75. So if you have

Schedule A -Itemized Deductions


Schedule D - Capital Gains and Losses

, too, tack on another$150.

Just be open about your situation to ensure an accurate quote.

So make a decision -- and do it soon. You can't expect a pro to get your return done if youshow up on April 14. And if you decide to prepare it yourself, you know that your child's going toshove a banana in your disk drive the day you decide to work on it.

Tracy Byrnes is an award-winning writer specializing in tax and accounting issues. As a freelancer, she has written columns for and the New York Post and her work has appeared in SmartMoney and on CBS MarketWatch. Prior to freelancing, she spent four years as a senior writer for Before that, she was an accountant with Ernst & Young. She has a B.A. in English and economics from Lehigh University and an M.B.A. in accounting from Rutgers University.