Taxpayers of all types can benefit from hiring a tax accountant. But before you spend your hard-earned cash, here's some simple steps you can take to protect yourself, to find the right professional for your situation, and also some questions to ask.
Understand Why You Need a Tax Accountant
You should take some time to focus on exactly what you need your tax accountant to do. Here are some common situations:
- 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, and you need specialized advice and tips.
- You would like to pay as little taxes as possible, and need detailed planning and advice.
- You are facing a tax problem, such as filing back taxes, paying off a tax debt, or fighting an IRS audit.
- You run a business, invest in the stock market, own rental property, or live outside the United States.
Finding a Tax Accountant
You should seek out an experienced tax accountant who has experience dealing with tax situations similar to your own. For example, if you are being audited, don’t hire a tax professional who has never handled an audit before. Here are tips for finding the right professional who has the specialized tax expertise you need. Remember: you, not the accountant, are ultimately responsible for the information on your tax return.
- Referrals are your best bet. Ask everyone you can think of: family, friends, business owners, financial advisors and attorneys. It will help to ask someone who has a similar tax situation to yours.
- Be wary of an accountant who promises you big refunds or that says you can deduct everything.
- Do not be afraid to shop around or to change accountants if you are not comfortable.
- Retail tax franchises such as H&R Block, Jackson Hewitt, and Liberty Tax Service offer competent tax service for individuals who need to file relatively straight-forward tax returns. Some tax preparers will be more experienced than others, and you can sometimes find CPAs and Enrolled Agents working in these offices. Prices are often determined by how many tax forms need to be filled out. Here's a tip: ask if you can meet with a CPA, enrolled agent, or senior tax preparer. You'll pay the same, but you'll get to speak with a seasoned professional.
- Local, independent tax firms often specialize in the tax needs of individuals and small businesses in their neighborhood. Again, some independent tax accountants will be more experienced than others. Ask if the firm has the expertise to handle your taxes.
- Enrolled Agents (EAs) are tax professionals who have passed a rigorous test and background check administered by the IRS. Enrolled agents often specialize and are best for complex tax situations. EAs can also represent you before the IRS if you are dealing with an audit or collections.
- Certified Public Accountants (CPAs) are accountants who have passed the rigorous CPA Exam and are licensed by the state they work in. CPAs will specialize in an area specific to accounting. Though some CPAs will specialize in tax accounting, not all CPAs handle tax issues. CPAs can also represent you before the IRS if you are dealing with an audit or collections.
- Tax attorneys are lawyers who have chosen to specialize in tax law. Often, tax attorneys will have a master of laws degree in taxation (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 US Tax Court. For more information, see When Do You Need a Tax Attorney?
Questions to Ask a Tax AccountantThe tax industry is constantly changing and tax professionals are subject to various federal and state regulations. Here are some questions you can ask to help ensure you find an experienced, trustworthy tax accountant:
- What licenses or designations do you have?
- How long have you been in the tax business?
- What tax issues do you specialize in?
- Do you have the knowledge and experience to handle my tax situation?
- What are your fees?
- Do you outsource any of your work? Do you perform the work personally? If not, what is the review process? Who signs the returns?
- How long, approximately, will it take to finish my taxes?
- Do you believe 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 taken against the CPA. For enrolled agents, you can ask the IRS Office of Professional Responsibility if an EA has been censured, disbarred or subjected to other disciplinary action.