Let’s face it – when you ask the average American what comes to mind when they think “taxes”, the first thing they think of is a Certified Public Accountant (CPA). Why is that? Well, the simple answer is CPAs across the country and across time have spent millions telling you to think that way. Before you jump to conclusions, this is not a manifesto directing you to believe that CPAs are bad. This is a declaration that there is so much more available to the average American and much of people’s understanding is shrouded with misconception.
Most taxpayers simply Google “tax professionals near me”, find the first available, cheapest, or the most aesthetically pleasing website or social media page. My purpose is to help illuminate how taxpayers can evaluate or discern who is the best fit for their tax needs. Let’s make sure I get one thing clear – I do not believe every American should be paying for a tax professional’s services. There are many taxpayers who are fully capable of preparing their own return based on the fact many of their tax returns are very simple. They are single, work a W-2 job, have no dependents, have no itemized deductions, they live in the same location as the year before, and have no other significant abnormalities. That does not mean this type of taxpayer should not use the services of a qualified tax professional mainly for the fact that there are numerous other advantages beyond the scope of just preparing a single year tax return. My goal is to debunk some potential misunderstandings about my profession.
#1 CPAs, Enrolled Agents (EAs), & Tax Attorneys are similar, but their specialties are different.
A CPA’s specialty is rooted in debits & credits (accounting or bookkeeping)
An EA’s specialty is taxation
Tax Attorneys specialty is tax representation
All three specialize in different areas but also provide services in each other’s specialty – CPAs do taxes even though their specialty is in accounting or bookkeeping likewise, EAs specialize in taxation but also offer tax representation and bookkeeping.
#2 Just because an individual has a credential (CPA, EA, or Tax Attorney) does not mean they are qualified to handle your situation.
Many times, I compare my industry to the medical field in one aspect. Many doctors have a medical degree, however, does not mean all medical degrees are created equally. Not all doctors are oncologists, neurosurgeons, or pediatricians. Likewise, not all CPAs, EAs, or Tax Attorneys are versed in all aspects of tax law. Although credentials are not an actual depiction of an individual’s qualifications, every American should seek out a credentialed tax professional. Generally, a credentialed tax professional is in the business of taxation full time which means they should be receiving yearly continuing education and should be proactively approaching their clients with helpful tax savings tips.
#3 My industry (taxation) is a service-based industry.
“The act of helping” – there are really 2 types of tax preparation firms out there:
#1 Firms which prepare returns with little to no communication with you.
They allow you to drop your return off, you don’t meet with a tax professional, you’re not even sure who is doing your return. Eventually, you get a call telling you that your tax return is finished and to come pick it up.
#2 Firms who develop relationships with their clients.
These types of firms make it a point to ask enough relevant questions to do an accurate return. You know your tax professional, you don’t need to Google them each year. You build a relationship with them, they become a trusted advisor. They advise you and offer tax beneficial strategies.
Service based tax professionals make it a point to make sure you are more aware of your tax situation than you were before you hired them.
So how do you decide what tax firm or tax professional is right for you? I have assembled a simple list of things to help guide you in your search:
#1 Ask if they have a PTIN
A PTIN is required of all “for compensation” tax preparers. In the past ,PTINs were free but that is not the case anymore.
If the preparer doesn’t have an PTIN, efile the return, or sign your return, do not use them.
#2 Require a designation (CPA, EA, or Tax Attorney)
No tax professional can say they are certified in all 50 states as CPAs and Attorneys are credentialed in their individual state. EAs are nationally recognized meaning they can prepare and represent taxpayers in any state across the country. Once again, just because a tax preparer is credentialed does not qualify them as an expert. It does however mean that they have passed a series of pre-qualifying tests with varying amounts of study and ongoing education.
Having credentials will also allow a tax professional to represent their taxpayers before the highest levels of the IRS.
#3 Insist on communication
If you are looking for a professional relationship with a tax professional, which I whole heartedly endorse, do not accept a tax professional who will not meet with you, return your calls, or explain things to you in a manor in which you understand. Communication is paramount. Without communication the accuracy of your return should be in question. What exactly are you paying for?
#4 Inquire if they are available year round
In this instance availability is huge! Are they in a tax related industry all year? Do they do something else for employment during non-filing seasons? Whether or not your preparer is fully emersed into taxation or not all year long may not be important to you. However, let me give you some potential reasons that should be important to you.
#1 Tax law is ever evolving and requires constant education and due diligence. Tax professionals who are not keeping their thumb on the proverbial pulse of tax law change will inevitably miss a potentially crucial tax savings or benefit to you personally or your business.
#2 Letters from various tax entities (IRS, State, or various local authorities) are generated every day and many times not by a human being. If your tax professional is not available to help navigate a letter with little to large consequences, you are left to negotiate it yourself or find an actual tax professional.
Hiring an individual to prepare your return who does not do this as their full-time profession is like hiring someone to fix a leak in your roof who 5 summers ago worked on a construction crew. You have little to no chance to get them to stand behind their work or to be available if additional issues arise.
#5 Do they offer free consults
Price is always tricky in the world of taxation. I meet people every day who don’t know what kind of tax return they have or its complexity. Generally, tax return costs vary across the country but average close to $220 to $270. The key when selecting a tax professional is knowing what your return will cost prior to committing through a free consult. Assuming you have all the required documentation to give an accurate quote, a skilled and professional tax preparer should have no issue giving you a fairly accurate quote.
Price isn’t always everything. Many firms offer more perks in addition to their standard fee, like yearly tax planning consults, at no additional cost. Other firms send a bill when you just think about calling or emailing them. You need to be able to evaluate value versus cost. What are you receiving for what you are paying? \Personally, I believe value is more important than just cost. You can always find someone cheaper, but what value are you potentially sacrificing to find the cheaper option. How are you treated – are you a billable hour or are you treated as a person?
There are a ton of fantastic tax professionals out there, many don’t have flashy websites, or spend 1% or more of their budget on marketing to make you feel like they’re the right fit for you. They are people just like you and me who have a passion for what they do and have a heart for service. It can be a difficult task to choose a tax professional, however I hope this article was helpful and can point you in the right direction.