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Should You Choose a Tax Preparer or Go It Alone?

BY JIM LARRANAGA

 

Talking about Money with Jim Larranaga

(ARA) - There are two things that are necessary, but unnecessarily tedious, in life -- laundry and taxes. I can't help you with your laundry, but I can provide pointers to help you wring out the most from your tax return.

Completing your taxes on your own may save you the fee of hiring someone else to do it, but unless you're an expert, it could cost you more in the long run. If you decide to hire a tax preparer, it's important to know your options.

National Tax Services: Most taxpayers with routine returns can benefit from one of the nationally advertised tax services. They're open nights and weekends during tax season and often operate on a first-come, first-served basis. Costs vary with each franchise, but in general stick to the theory that the more forms and lines they have to fill in means the more numbers you place at the end of the check you write them.

Enrolled Agents: If your return is more complicated, an enrolled agent may be the answer. They are licensed by the federal government and are able to represent you before the Internal Revenue Service. Enrolled agents are paid by the hour, with fees a bit more than those of national services.

Enrolled agents are required to complete a minimum number of credit hours of continuing education each year. They can:

• Prepare tax returns
• Answer questions regarding national, state and local tax laws
• Provide tax assistance for estates, trusts, partnerships, corporations and other entities that are required to report taxes.
• Practice anywhere in the United States

CPAs: Unlike enrolled agents who specialize in preparing taxes, certified public accountants specialize in accounting methods not always pertaining to taxes. I suggest using a CPA if you have recently experienced major changes, such as marriage, divorce or retirement, or your tax return is complex for any other reason.

The price tag for a CPA is a bit higher than an enrolled agents' and depends, again, on the type and length of services required.

Tax Attorney: Tax attorneys are the cream of the crop, so to speak. While their fees are higher -- sometimes reaching a few hundred dollars an hour -- their expertise is also more refined. They are well-informed on tax laws and their applications can litigate tax disputes.

I suggest a tax attorney if you are using complicated tax shelters. Their knowledge is also handy if you're dealing with estate planning or divorce proceedings.

Buyers Beware: Remember, no matter who does the work, your name is printed on the return, and you are solely responsible for any false information provided to your tax preparer.

Author:

Jim Larranaga is president of Priority Publications, a Minneapolis-based publisher of financial newsletters.

Courtesy of ARA Content

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