Should You Hire a New CPA to Prepare Your Taxes?

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As tax season draws near, it's time to think about whether or not the person who does your taxes deserves to be on your team this year. It doesn't matter if that person is a CPA or not (and in this post I'll use CPA and tax preparer interchangeably). Here are eight questions to help determine if you have the right tax professional -- or not.

1. Are All Your Questions Answered in a Timely Manner?

Sometimes professionals forget who the boss is –- you. If you are working with someone who isn't able to directly respond to you in a way that you understand, it's time to look around. There are plenty of CPA fish in the sea -- and you deserve to be treated with respect.

2. Does Your Tax Preparer Also Sell Investments?

Tax work is a full-time job. If your tax person spends time selling life insurance or investments, that means he isn't focused on taxes. A jack of all trades is a master of none. And when it comes to taxation, you need a master in your corner. The last thing you want is a return prepared by someone distracted by investments.

3. Do You Like Your Tax Preparer?

Like I said, it's important to feel comfortable with your tax professional. You don't want to think twice before picking up the phone to ask a question. You need a CPA who cares about you, who is empathetic and pleasant to deal with. Now let me be clear. Just because you like your CPA doesn't mean she's the right person for you. But if you don't like her, she's definitely the wrong one.

4. Are You Paying Too Much?

Tax preparation is a highly individualized service. Sometimes it's OK to overpay if the person is extremely good, easy to work with and really understands you and your situation.

But you still need to know if you are being clipped. The only way to know is to shop around. Take your last two tax returns to three other tax pros. Sit down, let them review your documents and listen to what they have to say. Besides asking them to provide a quote, ask if they have any suggestions. Do they see any overlooked opportunities? Of course these people will try to sell you -- but if all three point to a problem, it may be time to hire a new tax guru.

5. Is Your Work Handled Accurately?

Everybody makes mistakes, and it's OK if there is an occasional error. Don't forget that tax people are under extreme time pressure. But if errors are numerous or get repeated year after year, dump your CPA before she has a chance to flub up your return this year, too.

6. Is She Proactive?

The federal tax code is thicker than a stack of phone books. There are almost 74,000 pages in it. Somewhere in there are rules that can help you reduce your tax liability. The difference between good CPAs and mediocre CPAs is that good ones aggressively look for opportunities while the others act like glorified clerks and simply fill out the forms without even thinking about it.

I admit that not everyone can put the tax law to full use. If you are an employee and have a very basic situation, it may be difficult for your tax preparer to find ways to reduce your tax liability. But at the very least she should be talking about itemized deductions and retirement plan contributions. And if you are self-employed, there are a host of areas that a good CPA can draw on to reduce your tax liabilities. Make sure you work with someone who is really earning his keep by bringing ideas to the table and doing some out-of-the-box thinking.

7. Is Your CPA Actually Doing the Work?

Just because you pay your CPA to prepare your tax return doesn't mean she is actually doing the work. In many cases tax professionals outsource the work and simply check the final return. That isn't necessarily a problem as long as the person who does the work is qualified and knows what they are doing. It's very possible that your CPA will hire another CPA to prepare your return. But there are still a few worries I have when this happens.

The first issue that comes to mind is competence, of course. If you don't know who is doing the work, you have no idea how well trained they are. But there are other concerns too, such as security.
You certainly don't want your private data floating all over the Internet. And this is a huge problem if your tax person outsources their work overseas, which some do.

Ask your tax preparer who will prepare your return and get the answer in writing. This keeps everyone honest.

8. Do You Even Need a Tax Preparer?

If you have a complicated financial situation, you are well advised to hire a pro to prepare your taxes. But if your situation is straightforward, consider doing your own taxes. It's very possible that you could buy software and do a better job yourself.

How do you know if you should do your own taxes? First, if your CPA is outsourcing your return, it's a pretty good indication that your situation isn't too difficult. Next, if you are an employee, you don't itemize and have a very straightforward investment portfolio, you could very easily prepare your own return. Even if your situation is more complex, you should check out the better tax prep programs Most are very good at walking you though the process of completing your return. This is true even for people with almost no tax background or understanding.
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