Tax season is here, and you want to hire a professional. But should you use a storefront tax preparation service, or hire an independent tax professional?
Thanks to an iffy economic year, you may have a more complicated return than last year. Hiring a professional can help you avoid the dreaded audit letter from the IRS. But choosing the right tax preparer can make all the difference.
National Tax Preparation Chains
Going to the local office of a national tax preparation chain like H&R Block (Stock Quote: HRB) or Jackson Hewitt (Stock Quote: JTX) offers a lot of convenience. H&R Block has more than 12,000 locations nationwide. You can make an appointment with a tax preparer at a local franchise, or you can walk in to many locations and walk out with a completed return. In terms of speed and efficiency, this is hard to beat.
Like many national chains, tax preparation firms can afford to offer customers reasonable prices, but sometimes you get what you pay for. Although these firms require tax preparers to complete training programs, experience can vary widely. Many tax preparers are hired on just for the tax season and are paid very little. You might luck out, however, and get a seasoned CPA, but there are no guarantees. If your return is audited, your tax preparer may not be authorized to represent you before the IRS.
One of the advertised benefits of using a chain tax firm is the availability of refund anticipation loans. These firms will advance you your refund when your returns are completed. If you wait for the IRS to process your return and issue your refund, it can take weeks. These refund anticipation loans, however, carry high fees and interest rates.
Independent Tax Preparers
The tax preparation industry is largely unregulated, and virtually anyone can call himself or herself a tax preparer. Only three states—California, Maryland and Oregon—even require licenses. If you decide to hire and independent tax preparers, you should use caution. Find out what level of experience a tax preparer has and if he or she is credentialed. Check out prospects with the Better Business Bureau.
When hiring an independent tax preparer, you should look for someone who can represent you before the IRS if you are audited. Only certain individuals who prepare tax returns are authorized to represent you to the IRS. Enrolled agents, CPAs and attorneys are among them. An enrolled agent is licensed by the federal government. These are often former IRS employees. A certified public accountant (CPA) has passed a state qualifying exam in accounting. Some tax attorneys also may also prepare tax returns on the side, and they are often up to date on the latest tax laws.
The main benefit of working with an independent tax preparer is the personalized service. You can develop an ongoing relationship that may prove beneficial throughout the year, not just at tax time. Working with a tax professional year round allows you to make better financial plans to maximize tax savings.
One downside, however, is that independent tax pros often book up during tax season months, if not a year in advance. It’s best to start a new relationship with a tax preparer in the fall or early winte,r before the tax crunch hits. Additionally, independent tax pros charge varying prices. Get a quote upfront based on last year's return so you aren’t surprised by a bill that eats up your refund.
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