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First, let me qualify this article by saying that by no means am I trying to discredit or insult any of the hard-working, honest people out there in the Tax Preparation Industry.  There are many industrious tax preparers that genuinely care about their clients and their own technical knowledge.  On occasion, I am overly impressed or even shocked at how knowledgeable someone can be even though they have no formal education or professional license.  Usually, I try to hire them!

Furthermore, this article is not intended as marketing material for Credo Financial Services.  Credo is a great fit for some people, it is not a fit for everyone.  You will need to find the best solution for yourself given your particular needs and your budget.

What I would like to do is merely point out some items for you to consider while you try to navigate the marketplace and choose a method for a timely and accurate filing of your taxes (and, yes, sometimes it makes the most sense to just use TurboTax).

  1. California, Maryland, New York, and Oregon require tax preparers to register with the state and meet some sort of minimum standard. The other 46 states, along with the District of Columbia, put forth these requirements:
    1. You have a heartbeat.
    2. You are breathing.

The IRS tried to require that “tax preparers” pass a very basic competency exam in order to be compensated for tax preparation services.  That was struck down by a federal district court last year.  So, don’t assume that if someone is a “tax preparer”, that it means anything.  In most states, you could hang a shingle today and say that you are a tax preparer.

  1. There are two good websites I recommend in order to locate licensed professionals:
    1. aicpa.org (for CPAs; Certified Public Accountants)
    2. naea.org (for EAs; Enrolled Agents)

Key to remember is….A majority of CPAs do not have tax expertise even though the CPA exam has a section on tax.  Tax is only a small part of the exam.   EAs, on the other hand, take a rigorous exam that is all focused on tax.  I know a lot of EAs that I would put ahead of CPAs when it comes to tax knowledge.  Now, I am a CPA, and I am not making a general statement that EAs are better at taxes than CPAs.  Not at all.   But, I am saying that EAs can also be very good and very competent tax professionals.  And, only EAs, CPAs, or tax attorneys are able to represent you in front of the IRS.

  1. The average price to prepare (with no consultation) a federal and 1 state tax return, with itemized deductions, is currently $273. Your cost will vary depending on the nature of your return, the organization of your tax documents, the number of schedules that need to be prepared, the professional designation of the tax preparer, how much strategy and planning you want, etc.

Here is what to beware of – lowball pricing.  A common technique is to lowball the price to get your business, only to upsell you later or charge you more before the return is filed.  And, then, they refuse to file your returns until you pay.  This practice is clearly unethical.  Instead, if you get a fixed price for your tax return preparation, make sure you have an agreement that you will NOT pay more unless the situation is explained to you in detail and you agree to additional fees before the work is done.  And, of course, if any preparer promises you a refund (or even worse wants to get paid a % of the refund), run for the hills.  No ethical professional can promise such a thing or should be paid on a commission basis.

  1. Good tax professionals will ask you questions about your own personal situation; they will give you an idea of cost in the beginning…it won’t be “secretive”.
  2. Tax Professionals are required by law to have a PTIN (Preparer Tax Identification Number). If a preparer does not have a PTIN or does not want to sign the return, grab your tax documents and leave.  Incredibly, I have heard of instances where tax preparers ask the client to sign the return before the numbers are in the return.  Never, ever, ever do that.  You are responsible for the return, not them.  This has been tested in the legal system already.  It’s not gray.   Don’t think that someone else is responsible for your return or that you are able to “pass the buck” on the responsibility of what is in your return.  That is fantasy.
  3. Doing the return yourself might be just fine. Tax programs like TurboTax or TaxAct do a decent job of flagging errors and suggesting deductions (in the deluxe/premium versions).  Furthermore, you can file your federal return for free (if your household adjusted gross income was $60,000 or less during 2014) on this site:


My overall advice would be:

  1. Decide whether you are (a) going to prepare your own taxes or (b) hire someone to prepare them for you.
  2. If you choose to hire a tax preparer, err on the side of getting a CPA or EA. If not, at least make sure they have a PTIN and that they are recommended to you by someone you trust.
Dan Lucas
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