According to the National Retail Federation Monthly Consumer Survey 25% of consumers will hire an accountant to prepare their taxes this year, while only 17% will use a tax preparation service. Though a tax professional can provide peace of mind that your tax return is accurate and compliant with tax law, it’s important you understand the services your tax preparer offers, what you’ll pay for their help, and what is required of you in the process. Here are five questions you should ask any potential tax preparer.
On what criteria do you determine rates, and how do you bill? The National Society of Accountants (NSA) estimates that a taxpayer who hires a professional tax preparer to file an itemized Form 1040 and Schedule A, and state tax return will pay about $273 for the service in 2015. But tax preparer experience and education levels vary significantly, as do their rates, and how they’re applied to your tax preparation job. Ask any tax preparer you are considering hiring how they bill, whether hourly, or at a flat fee, and what they estimate your taxes might cost (understanding that things could change once they get into the details). Inquire how they bill time for phone calls, meetings, and email exchanges. Some tax preparers will consider such conversations part of the service, while others bill for every interaction.
In what format do you want tax information? Tax preparers have their own definitions of optimal work-systems based on personal preference. Ask whether they prefer to receive and transmit files electronically, in hard copies, or through a cloud-based online system, and if they provide client with a tax organizer (either electronic, or hard copy) that can help you compile the information they need. Consider how their workflow fits into your record-keeping style. For example, a preparer who relies on hard copies and fax machines may not be in sync with your cloud-based recordkeeping. Finding the right match can save you both time, frustration, and potentially, money. The NSA reports that accountants charge an average fee of $114 for disorganized files (which may be in the eye of the beholder).
When do you need information in order to file by April 15th ? The NSA reports that tax preparers charge an average of $85 to prepare taxes with less than 15 days until the tax deadline, and a fee of about $44 to file a tax extension. Know when your tax preparer considers your information “late” based on their specific workload and capacity, and how that work will be billed, and handled. If you don’t want your tax preparer to file an extension, for example, you may want to shop around for someone who can meet the April 15th deadline.
What kind of creative and strategic advice do you offer? If you’re hiring a tax preparer to file a straightforward tax return simply for the peace of mind that it’s been filed accurately, you may not need tax planning strategy services. But if your tax needs are more complex for reasons like owning a business, investments, rental property, or having several sources of income, part of a tax preparer’s value will lie in his or her ability to suggest tax advantages that can legally reduce your overall tax burden. Not all tax preparers are equipped to offer this level of strategic advice. If that’s a service you seek, ask about their ability to guide you in such a way before you hire them.
Do you offer tax services all year long? Tax preparation services are in high demand from the first of the year through the late spring. Confirm that the tax preparer you’re considering for hire is available in a professional tax preparation capacity throughout the year, and not simply “moonlighting” as a tax professional in times of high demand. Even if you only need their tax preparation services once a year, you may need to call on them for support if you apply for a home or business loan, or are contacted by the IRS, state, or municipal tax agency.