Should You Go With A Pro?Mary Beth Regan
If ever there were a year when doing your taxes might cause you to scream, this is it. With all the confusion over capital-gains-rate changes and new tax credits, you may want to shun the do-it-yourself route and consider handing off your paperwork to a pro.
Your most important job will be determining the complexity of your tax situation so you can pick the appropriate adviser. Do you simply need someone to fill out forms, or do you require expert planning help to look over your assets in light of new estate-tax rules? Your decision will govern your cost: Tax services range in price from $50 per return at a storefront office of a national chain to several thousand dollars at a top-flight accounting firm.
CHANNELS. Keep in mind that anyone can hang out a shingle that says "tax preparer." "There's no shortage of people charging $50 and guaranteeing a return," says Robert Carto, president of the Maryland/D.C. Society of Enrolled Agents. "You don't always know what you're getting." That's why, unless the solo practitioner you've heard about has impeccable references, you might want to make sure he or she is an accredited member of one of the four main categories of tax professionals (table).
Most commercial preparers at chains such as H&R Block and Jackson Hewitt have the skills to handle relatively straightforward returns. At H&R Block, for example, they must complete a 66-hour tax course, though they're not required to have a high school diploma. In addition to filling out forms, they can accompany you to an Internal Revenue Service audit. But they can't represent you. Be aware that many are temps who only work during tax season, so the person you use may not be around if you run into a problem after Apr. 15.
H&R Block does have premium offices to serve taxpayers with more detailed returns. These are staffed by preparers with 500 hours of training who have completed at least 3,000 returns each. Fees average $120 per return, compared with about $70 at a regular office.
VERSED. Enrolled agents are next in the pecking order. Many are former IRS auditors or experienced preparers who have passed a grueling two-day IRS test. They also complete 72 hours of reeducation every three years. At $80 to $150 an hour, they can assist people with complex tax questions that don't require the broad accounting skills of a certified public accountant. And like a CPA, they can represent you before the IRS. You can sometimes consult enrolled agents at offices of the national tax chains. Or try the National Association of Enrolled Agents' Web page (www.naea.org) or referral hotline (800 424-4339).
If you're a sole proprietor or trying to figure out the tax consequences of complicated stock transactions, you may need the expertise of a CPA. Accountants are well-versed in most aspects of business and personal financial planning. These general practitioners of the tax trade must pass a national exam and are licensed through state boards. Their skills could be especially useful this year in sorting out the permutations of the capital-gains rules. "The accounting comes in very handy, especially when you have someone who's trading in futures or hedging," says Thomas Ochsenschlager, a tax partner at Grant Thornton, an accounting firm in Washington.
Tax lawyers usually don't prepare returns, though they often can refer you to accountants who do. But they draft wills, trusts, merger agreements, and other documents with tax implications. If you ever face civil or criminal charges stemming from a tax matter, you'll need a lawyer to represent you in court. To check out an attorney's background, call the state affiliates of the American Bar Assn. and ask about disciplinary actions. Still, "the best referrals are from friends," says Phillip Mann, chairman of the ABA's tax section. No matter which type of expert you use, having professional help should ease the headache of preparing your returns. In a crazy year like this, it's better than gulping aspirin.