Check experience and personal fit when looking for a certified public accountant to handle your taxes.
You've got to be comfortable with the person peering into your financial history so ask for references. Then sit down and talk with the prospective CPA. Many accountants won't charge for a brief getting-to-know-you meeting.
But it works both ways.
"If I feel a potential client isn't being open and won't provide all the needed information, I tell him that we can talk about the weather, but we can't do business," says Ralph Kerr, a certified public accountant in Coeur d'Alene, Idaho.
Ask about cost straight up. Fees vary from region to region and city to city. Nail down the hourly fee and estimated time needed to prepare your return before handing over your financial records.
A simple tax return can be completed in 60 to 90 minutes, including review and clerical processing. Preparing a return for a small business with accurate records take about 2.5 hours. An investor with extensive capital gains and losses should expect to pay for five or six hours to prepare the return. Complex and detailed tax returns with investments plus several real estate transactions and other financial transactions can take as much as 12 hours to complete, Kerr says.
Kerr says he gives clients an organizer to help them lay out deductions, type of income — earned, investment, business or real estate, for example. Charitable gifts, moving and business expenses also need to be organized.
"Don't be afraid of giving your CPA too much," Kerr says. "It's less expensive to have too much information on hand than for the accountant to keep requesting more."
A taxpayer with extensive financial activity in a certain area — restaurants, retail stores or real estate, for example — should find an accountant with industry-specific experience. Tax law changes just about every year so an accountant who says, "I don't know — I'll have to check" is being honest. It's a good bet that anyone who claims to have all the answers doesn't.
"If the April 15 deadline is approaching, don't assume you're the only last-minute client your accountant has," Kerr says. "Respond quickly to requests for additional information — efficiency keeps the costs down."
Of course, CPAs aren't the only option. Taxpayers can also hire an enrolled agent, tax attorney or a tax preparer or they can go it alone with tax-preparation software. Only enrolled agents, CPAs and attorneys can represent taxpayers before the IRS.
Enrolled agents are licensed by the Internal Revenue Service and are similar to CPAs, but typically charge less. They're required to pass IRS exams and take continuing education classes.
For taxpayers with simple returns, a tax preparation service, such as H & R Block or Jackson Hewitt Tax Service, could be the way to go. Tax preparation software, such as Turbo Tax by Intuit, Tax Act by Second Story and TaxCut by H & R Block, is also available.
As always, shop around.