Having a tax preparer you can trust and rely on is a beneficial relationship anyone can benefit from.
Sure, for some people it’s easy enough to DIY taxes, but it’s not for everyone 😉
What if you are the latter and are “not a numbers person” or just don’t have the time/inclination to try to do it yourself?
Maybe you prefer outsourcing your individual income taxes to a pro.
How do you go about finding a tax preparer you can trust to do right by you?
The absolutely best way is to interview potential tax preparers.
This is the most important thing I tell my own potential clients.
Interview other candidates.
What are you supposed to ask them about?
I’m glad you asked, because I’m about to give you the questions to ask a potential tax preparer as well as some of the answers you should accept.
Tax Preparer Qualifications
Right off the bat, I want to address two things:
- Not all “accountants” deal with individual income taxes
- Alphabet soup doesn’t me a damn thing on its own
What does that mean?
For starters, the job title of “accountant” is a broad term.
Someone who is in corporate accounting probably isn’t the best person to turn to for help with your individual income taxes.
The same goes for an internal accountant at a retail store.
Also, letters after a name mean little for CPA’s just like for doctors and lawyers.
There are doctors and lawyers that specialize in specific areas who would not be able to give you good service in others.
For example, you wouldn’t go to an estate attorney to defend you in a murder trial.
You also wouldn’t go to an OBGYN if you are having issues with losing feeling in your extremities.
The same goes for a CPA.
Some specialize in audit or forensics or valuations and don’t necessarily keep up with all of the intricacies of the tax code.
Does a particular tax preparer have an education in accounting?
How long have they been working with individual income tax returns?
How many returns do they typically work on each year?
Make sure the tax preparer you are interviewing has the right experience to help you with your individual income taxes.
Availability & How To Contact The Tax Preparer
Having a tax preparer won’t be of too much help if you can’t ever get in touch with them.
That’s a problem a lot of people face, not just during tax season, but year-round.
When I was in college, my very first tax class was taught by a semi-retired accountant.
He only worked during tax season and the rest of the year he taught twice a week, otherwise he was “retired”.
Back then I didn’t think anything of it, but now that I’ve been preparing taxes for a long time and running my own tax preparation business I see the trouble in that.
His tax clients weren’t getting the highest quality service they could/should have received because they were left out in the cold for the majority of the year.
The big thing is that individual income taxes are something that needs to be paid attention to all year round.
So many of the seemingly normal decisions we make have tax implications:
- Getting married
- Getting divorced
- Having a baby
- Moving (ie: state income tax requirements)
- Changing jobs
- Losing a job
- Starting a business
These things happen at random times, not just during tax season so it’s vital to have access to your tax preparer whenever you need to ask questions.
Besides that, you want to make sure that your tax preparer will be able to speak to you when you need.
That means finding someone who may have “late” office hours or can accommodate your schedule.
For instance, some people only have evenings available to deal with financial or tax matters.
Heck, some people can’t make the time except for weekends.
All you working single parents out there know exactly how that goes!
The other part of this equation is actually getting through to your tax preparer.
Some are like other professionals and hide behind a secretary who screens all calls and never puts anyone through right away.
Then you have some who take days to respond to emails.
Neither of those are good for a client.
Working with a tax preparer who you can actually reach when you need the help and can actually find the time to speak to them is highly important!
What Kind Of Clients They Work With
With the above situation regarding availability and reliability covered, we can now look at the next logical question:
What type of client does the tax preparer work with?
If you know that they have a strict 9-5 office, for example, and don’t make exceptions, then you as a working parent probably don’t want to work with them.
If you are a low-income client but the tax preparer only likes to work with high-net-worth clients then you probably wouldn’t be able to afford them.
If a prospective tax preparer is more experienced in business tax returns than individual income taxes you might want to choose someone else.
There are other situations that are pretty specialized as well when it comes to individual income taxes:
- Living on a military base
- Digital nomads
Each of these category of taxpayer has special rules that not all tax preparers want to deal with.
Trust me, I am one of those people–I don’t have experience with clergy nor expats so I always refer potential clients to those who have the experience and qualifications to deal with those clients.
The bottom line is that you need to ask this question because you don’t want a tax preparer “learning” with your return.
You want someone who already has the experience and can deliver the highest quality service to someone in your specific situation.
How Does The Tax Preparer Work?
Something that you might not think about is the process that a particular tax preparer has implemented in their office.
For example, I prefer a somewhat technologically advanced approach so I do everything remotely and electronically.
Meetings are done via phone or video chat.
Documents are passed back-and-forth via an online portal.
I communicate with my clients in any way: phone, email or text.
That might not work for all people.
Some clients may prefer in-person meetings, sitting directly across from someone while speaking.
Some may need a tax preparer who is more traditional and prints everything out and gives them a hard copy.
You need to interview people to find someone who functions in a way you are comfortable doing business.
Another thing I take issue with when it comes to many tax preparers is how they handle information.
So many still to this day use email to send, and allow their clients to send, personal information.
My issue is that this is one of the ways people become victims of identity theft.
Anything that has a client’s address, social security number, date of birth or any other identifying information should be sent securely.
For example, I use an online portal that implements bank-level encryption.
My clients have enough to worry about without me adding to it by opening them up to ID theft!
How They Charge For Individual Income Taxes
This is something I often take issue with.
I’ve never really liked how many tax preparers price individual income taxes.
One firm I used to work for didn’t have a pricing structure, but instead, the partner would ask me how much the client made and based the price off of that.
I’ve seen some tax preparers who have a “menu board” of prices–think of a fast-food restaurant–where they give you a base price and how much each input form (ie: 1099-INT, 1098-E, etc) or tax form (ie: schedule A) would cost on top of that.
Some don’t even tell you a price until the finished product is ready.
However, it’s very important to know what you are expected to pay ahead of time for you individual income taxes.
It doesn’t have to be an exact amount, mind you, but you should know what your tax preparer will be charging you within a reasonable range.
Now, in terms of what you should be paying or what constitutes a “reasonable” price or individual income taxes is very subjective.
That really depends on the complexity of your return.
I cannot give you blanket advice other than to say that if you only have a W-2 there is no way in hell that it should cost you $300!
Another question to ask is how they pay their staff.
In the past I used go onto craigslist and scan the ads for tax preparers.
Some of the ads paid straight commission based on the volume of individual income tax returns a person can produce.
That is never good for you as a client because it signals that quantity is more valued than quality at that business.
Hiring part-timers in general isn’t really that good because it means someone who doesn’t know you will probably prepare your taxes each year going forward.
Ideally, you want to go with a firm that pays a salary and has the same staff year-to-year because it makes the relationship with your tax preparer better and you can feel more comfortable knowing that you are working with the same person who know your situation.
You may also want to consider how you can pay pay your tax preparer.
Do they accept credit cards only?
Some people are very particular in how they want to get paid, and their preference might not line up with how you like to spend money.
Tax Services: Some Words Of Caution
Some people may be considering using a tax service such as H&R Block, Liberty Tax, or some other retail-type/franchise tax preparer.
I’d like to leave you with a few things to think about.
First, you are generally “stuck” with someone who is going to prepare you individual income taxes.
You don’t get to interview them, or ask for someone who has specific experience with a particular situation such as expats or active military.
Another issue with these people doing your tax return is the fact that they may have simply taken an 8-week course in order to get that job.
There’s a reason why so many of these franchises advertise themselves as “great ways to make extra income for stay-at-home mothers or retirees” (paraphrasing of course).
That reason is that it doesn’t take the years of education and experience that professional tax preparers go through.
The training is mostly surrounding the use of the platform and not actual, in-depth tax theory and practice.
Here is one specific example:
At the last firm I worked for, we had a former client return after a 2-year stint using H&R Block to file her individual income taxes.
When I reviewed the prior year’s tax return I noticed that there was no “year-vs-year comparison”, which is a pretty standard part of the final tax package which shows the client how their situation changed, line-by-line.
Why is this important and so alarming?
She had capital loss carry-forwards from the last year my former firm prepared her taxes (I wasn’t there at the time) and that means the tax preparer provided by H & R Block didn’t bother to ask for prior year’s information or just didn’t know enough to apply the capital losses.
Worse is the fact that whoever the supervisor was that signed off on the return didn’t catch it either, or similarly didn’t even know to look/ask for that information.
No only did that cost the client thousands of dollars in excess taxes owed, but it also cost her money because we had to amend the tax returns to get her the money back.
This isn’t to say that all people working at these companies won’t deliver the highest quality service, but the chances are greater based on the nature of those specific businesses.
You just need to be aware of these concerns when considering using any of the tax services out there as your tax preparer.
As I said in the very beginning, a tax preparer is a very important person in your financial life.
The key is knowing what to look for when searching for one you an trust with your individual income taxes.
Interviewing potential partners and asking the previous questions should give you a much better idea of who you can trust more so than going in blind!
Just be sure not to take it to extremes.
Remember, you get what you pay for, so if you find someone that is super-cheap, there could be a reason for it.
Questions For You
How did you find your current tax preparer? Did you just hire the first person that was recommended to you, was it your “family guy/lady” or did you actively interview candidates? Are you happy with how things worked out or would you do something differently if you could redo it?