A taxing economy... Even for tax preparation firms

Death and taxes are the two things we can count on, and you'd think that tax preparation firms would be riding out the bad economy pretty well. But even though the economy struggles, large tax preparation firms are vying for your business, not leaving anything to chance. That means discounts for you because they're trying to appeal to the practical side of the American taxpayer.

TurboTax, a trusted name in do-it-yourself taxes, is offering a free tax calculator. H&R Block, one of the most recognized tax preparation companies is offering free advice on the Internet. TurboTax has a big advantage, however: because It's cheaper for taxpayers to use their product than to pay a company to do the taxes.

Taxpayers have to be cautious with their taxes, however. The tax code is complex, and taxpayers should only do their own taxes if they've got a relatively simple situation or have had the proper training to handle more complex issues. If you've got a situation involving a small business, a rental property, stock options, or other more complicated items, you're best off paying a professional.
When choosing a professional to prepare your taxes, be careful. I don't recommend the large chains like H&R Block or Jackson Hewitt because they often have lots of under-qualified employees. While the employees are typically trained on how to use the tax software, they often have little to no training about the actual tax laws. That means they won't be able to spot problems or opportunities for you.

Instead of one of the large firms, ask someone you trust for a reference. Who have they used? Who has a good reputation? Who would they go to if they were looking for someone? A local tax preparer with a credential like a CPA (Certified Public Accountant) or EA (Enrolled Agent) is your best bet when looking for a qualified professional.

Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations for her company Sequence Inc. Forensic Accounting, and is the author of Essentials of Corporate Fraud.

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