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Leslie Bonacum
Neil Allen

Take The Time To Pick A Tax Preparer Who's Right For You

(RIVERWOODS, ILL., January 2002) – If this is the year you decide to hire a tax preparer, you’re in good company. Each year, millions of Americans turn to professional tax preparers for help with their annual returns as they seek to minimize their tax liability, and without inadvertently crossing the IRS. In fact, in 1999, more than 69 million returns were submitted by an accountant, tax attorney, enrolled agent, a retail tax service or other paid tax preparer. To help you pick a professional who’s right for you, CCH INCORPORATED (CCH), a leading provider of tax law information and professional tax preparation software, offers these guidelines.

Let the Search Begin

  • Go with know-how. It’s a good idea to look for a tax professional who has consistent experience in tax, especially since tax laws change frequently. Since 1995 alone, there have been almost 2,500 amendments to the Internal Revenue Code.

Also, the increasing use of time-delayed effective dates for tax legislation passed by Congress may mean that new provisions can sneak into the tax code with little notice years after they were approved. Unless you’re tracking new tax developments every day, chances are you’re not aware of all of the changes that have taken effect since last year.

  • Ask your friends. The best place to start looking for a tax professional is with people you know. Ask friends whose financial situations are similar to your own if they can recommend anyone to help you.
  • Contact your state CPA, Legal or Enrolled Agent organizations. Many state organizations maintain computer databases of local accountants and other tax preparers and will provide free assistance in helping you select a tax professional in your area. Also, many of these organizations provide free assistance to low-income taxpayers who may not be able to afford tax preparation help. Finally, there are a number of Internet sites that provide listings and directories of accountants organized by locality.

Ask the Right Questions

Once you have identified several candidates, take the time to discuss these important questions with them:

  • What is the focus of your practice? Some tax professionals have specialties in areas such as real estate or small business. If you have specific concerns, make sure your tax professional is qualified to provide the special assistance you require by asking for references.
  • Are you familiar with the laws of states in which I am subject to tax? If you have financial interests in states other than where you live, make sure your tax professional is familiar with those state laws or has access to research tools covering those states. For example, if you receive income from a partnership operating in another state or live in one state and work in another, selecting a tax professional with interstate knowledge is important.
  • How do you bill your clients? Before you ask your tax professional to do anything, get a good idea of how he bills and the level of detail provided. Does he charge an hourly rate or a straight fee? How and when will you be billed? Will you be billed for research time if needed? To avoid confusion, get the billing and payment terms in writing.

Also, if you think you are interested in taking advantage of a refund anticipation loan, whereby you receive an advance payment of your refund, be sure to ask in detail about the associated fees. Most likely, there’s the fee to the tax preparation company to complete your tax forms, a separate fee to file your return electronically - which is a requirement for loan program participation – and the bank loan fee itself. You may find you’re paying a hefty interest rate on your own refund.

  • How do you characterize your professional style? Does she take an aggressive approach to minimize the tax burden even if it means incurring questions from the IRS or an audit? Or does she take a conservative path and risk paying a few extra dollars? Just as doctors have different treatment philosophies, tax professionals have different styles. As the client, you make the final decisions. Choose a tax professional whose approach closely matches your own philosophy.
  • If I am audited, will you represent me? Ask your potential tax professional if he would represent you if the IRS questions your filing or decides to audit you. If so, ask if he has much experience with IRS audits. While some such experience is good, too much can be a warning sign.
  • How do you keep current with the tax law? Does the preparer use current-year computer software to prepare your returns? Also, ask if she has access to tax research services, such as CCH, should the need for research arise.
  • What do you need from me? Ask exactly what information is needed and in what form. Many professionals provide print or electronic "organizers" to help you sort your financial records. Some ask that all tax information be saved on a computer disk, which can be downloaded into tax return software. The more organized you are before you give your tax preparer your records, the better he is able to prepare your return in the shortest time (and the more money you can save in fees).

A Final Check

  • Make sure your CPA is licensed by the state CPA association. If you decide to hire a CPA, check with your state CPA Society to verify her license and to see if any complaints have been filed. If complaints have been filed, look elsewhere.

Some General Hints

  • Keep accurate records all year. Or, at least organize your records before you give them to your tax professional. That means saving important receipts, stock earnings statements and salary records. By organizing your tax information before giving it to your tax professional, you’ll save the cost of having him organize it for you and save you both a lot of headaches.
  • Create an outline of your financial picture. You should have a general idea of your financial situation before you begin searching for a tax professional. Are your taxes simple or complicated? Do you run a business from your home,

have multi-state holdings or limited partnerships? The better you understand your financial needs, the better prepared you are to find someone to meet them.

  • Consider filing electronically. For a fee, electronic filing allows individuals or their tax professionals to send their return directly to the IRS through a computer modem at designated locations. The main benefit of filing electronically is that you receive your refund much faster than if you file through the mail. Generally, if your tax refund is large, electronic filing makes sense and could be worth the fee because you receive your refund sooner. Filing electronically is not the best option if your refund is small because the fee may be larger than your refund.
  • Get some mileage out of paying your taxes. You also can use a credit card to pay Uncle Sam, and in exchange take advantage of some benefits, such as matching airplane miles offered by credit card companies. Consider if there are benefits to charging your taxes, then quickly paying off the debt. You can use a credit card this year to pay your taxes when e-filing your return or using Telefile.
  • Don’t wait until the last minute. Whether you are planning to complete your return yourself or hire someone to do it for you, the earlier you begin, the better. Waiting until the last minute only increases the anxiety associated with tax time. If you just can't file on time, the last day you can file for a four-month extension without penalty is April 15. Even if you file for an extension and you think you owe, you still have to pay by that date to avoid interest and penalties.
  • Know your options. Certified public accountants are not the only help available for tax preparation; there are also tax attorneys, enrolled agents, certified financial planners and consumer retail tax preparation companies.

Confidentially Speaking …You’re Not

"It’s important to remember that even after you’ve made an informed choice, you still need to proceed with caution," said CCH Principal Analyst Mark Luscombe, JD, CPA.

Congress granted taxpayers numerous new rights under the IRS Restructuring and Reform Act of 1998 that affect both individual taxpayers and hundreds of thousands of accountants and enrolled agents who advise them on tax matters. Specifically, a recent law extended the existing attorney-client privilege to non-attorneys authorized to practice before the IRS.

"There are limitations, however, to this privilege with regard to tax preparation," cautioned Luscombe.

"If you review how confidentiality has been applied in the attorney-client environment, you’ll find that the privilege doesn’t apply to preparation of tax returns. Communications with respect to tax return preparation are simply not protected under the law, and taxpayers should not make the mistake of assuming that everything told to accountants is considered privileged communications," he said.

Definition of Terms

Here are descriptions of the different types of tax professionals available to help you during tax season.

Certified Public Accountant: A CPA is someone who has a wide range of accounting experience and has passed the CPA exam, which is given by the state board of accountancy. In order to be eligible to sit for the test, a CPA candidate must complete a number of education requirements. In addition, states can impose their own requirements. In order to maintain their certification, CPAs must earn a number of continuing education credits through their CPA societies.

Enrolled Agent: Enrolled agents specialize in taxation and are given their titles by the IRS. To become an EA, an individual must either practice at the IRS for five years and be selected by application, or pass an extensive four-part exam. They can represent taxpayers before the IRS, and in administrative proceedings, circuit court and, possibly, Tax Court if they pass the appropriate tests.

Retail Tax Preparation Company Employee: In general, people working at a consumer tax preparation company are trained and certified by the company that hires them. They have been trained by the company to handle returns for individuals who don't feel confident completing their own returns.

Certified Financial Planner: Certified financial planners receive special certification for financial planning, estate planning and investments for individuals from several noted organizations. Many are capable of providing tax assistance, but may not be formally trained as such. Many accountants are also certified financial planners.

Tax Attorney: A tax attorney is trained in the law and chooses to specialize in tax matters, including preparation, audits and litigation. As a general rule, attorneys are certified by the state in which they practice and many are required to complete continuing education courses, though not necessarily in tax topics.


CCH INCORPORATED, headquartered in Riverwoods, Ill., was founded in 1913 and has served over four generations of business professionals and their clients. The company produces more than 700 electronic and print products for the tax, legal, securities, human resources, health care and small business markets. CCH is a wholly owned subsidiary of Wolters Kluwer North America. The CCH web site can be accessed at The CCH tax and accounting destination site can be accessed at

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