How to Choose Your Tax Advisor

Peter VanderWoude, CPA, CGMA

March 1, 2016

If there is ever a hot topic this time of year, it is “who do you use to prepare your taxes and what do you pay?” How you answer that question depends on what you look for in a tax advisor.

There are two directions to go in. If you just want your tax returns prepared, you could use just about anybody who puts out a shingle. If you are looking for more than that, then you may want to build a relationship with a tax professional and firm who can provide you trusted advice year-round for years to come.

So what kinds of tax preparers are out there? There are two groups to choose from – those with professional credentials and those without. You might choose a local tax preparer who has been performing a full or part-time tax service for many years and is more than adequate for you.

You could choose one of the national tax franchises. They hire those who have taken their introductory tax course. These part-time folks enter your data by walking through a question and answer program. This is similar to what is offered by TurboTax for the do-it-yourselfers. There is no personal professional judgment offered here and they are generally available just a few months of the year. 

Then there’s EAs, CPAs and Tax Attorneys who can represent you before the Internal Revenue Service. What are those? An EA is an Enrolled Agent, a person who has taken and passed a comprehensive IRS exam or has been employed by the IRS for five years. All experienced tax preparers without professional credentials should aspire to pass this exam.

A CPA is a Certified Public Accountant licensed by the state in which they practice. CPAs have completed a Bachelor’s degree and likely a Master’s degree in accounting and tax, have passed a state administered multi-day exam on accounting principles, tax law and its applications. They have also completed at least  a two year experience requirement with an established CPA firm before receiving their license. CPAs provide a broad-based approach to your tax and accounting circumstances.

A CPA or an EA is a good choice for most people seeking professional advice. In the rare case you would ever need one, a tax attorney generally focuses on very complicated tax situations and tax court cases.

What about cost for tax preparation services? These will vary with the complexity and length of time it takes to prepare your return. You can ask upfront, but even the tax franchises won’t give you a final price until the tax return is completed. Often the credentialed tax preparers are around the same price or even less expensive. It comes down to what you value – the commodity of tax preparation or the relationship with a professional who becomes your trusted advisor and prepares your taxes.

Are you looking for a tax preparer? Ask for a referral and meet with the prospective tax advisor. Do you feel comfortable with the tax advisor and their approach? It’s okay to gauge their fee, but don’t make price your first criteria. It costs a lot to be in business and to maintain professional credentials. Those that offer tax preparation at very low prices likely won’t be around for long.

Oh, if you’re wondering about little known financial firms that advertise CPA-prepared tax returns for a few bucks…steer clear!


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