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Independent Tax Professionals: The Real Deal

Oct. 3, 2013
Income Taxes, Personal Taxes, Taxes
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This article is part of a 5-part series on tax preparation methods. To learn more about your tax filing options, check out Why You’re Filing Your Taxes Wrong.

For those with more complex tax situations (check out our guide to assessing your tax complexity to learn more), hiring an independent tax professional to handle your taxes can help you save money, time and headache. It’s also the most popular way to file taxes, with around 35% of taxpayers opting for professional help in 2012, according to Experian.

The experience and personal touch that an independent professional can bring can make taxes a lot more pleasant. Keep in mind that we’re talking about independent tax professionals here, not big-box preparers. There are several additional factors to consider if you’re thinking about bringing your tax return to H&R Block or Jackson Hewitt.  For more info, check out our guide to big-box preparers.

The Good

Compared to other preparation methods, hiring an independent tax professional often requires the least amount of time from you – just send over your documents and the professional will take care of the rest, including submitting your paperwork to the IRS. A good professional will take the time to get to know you and ask lots of questions to fully understand your tax situation. In many cases, that will translate into a more thorough tax return and a larger refund for you.

In addition, independent tax professionals will often help you with longer-term tax planning, including how to structure investments, expenses or business transactions to maximize your tax benefit. There’s also something to be said for the peace of mind that comes with working directly with a tax-knowledgeable person. That level of personal service is a big part of the reason most people who use an independent tax professional come back year after year.

The Bad

The most obvious downside of working with a tax professional is the cost. With rates that regularly exceed $200/hr, the cost of getting your taxes filed can easily add up. Even so, a tax professional will be much more efficient than you at filing your taxes, so that hourly rate may not be as bad as it looks. You can always ask for a rough estimate of how much time it will take so you can make sure you’re not caught off-guard. Even at a higher cost, the additional time and money savings provided by an independent tax professional will often offset their fee.

Of course, not all independent tax professionals are created equal. You’ll need to do your homework by asking for referrals, checking online resources like Ask an Advisor and vetting potential professionals for their past experience. The initial time investment required to find a good professional can be significant, but should easily pay itself back in the long-run.

What should I look for in a tax professional?

When choosing a tax professional, understanding qualifications is key.  You’ll want your tax preparer to have one of two designations:

  1. Enrolled Agent (EA): EAs are licensed directly by the IRS and can practice in any state. They focus exclusively on taxes and have to pass an in-depth, 3-part examination. In order to maintain their status, EAs have to complete continuing education requirements to make sure they’re up to snuff.
  2. Certified Public Accountant (CPA): A CPA is considered one of the hardest financial designations to earn, requiring over 150 hours of education, several years of experience and an extensive exam. CPA licenses are granted on a state-by-state basis, so make sure yours is licensed to work in your state. If you own a business, CPAs can often offer additional guidance on non-tax-specific topics like payroll and accounting, in addition to filing taxes.

Aside from raw qualifications, you should always vet tax professionals for experience and personal fit. You’ll want someone who you can trust to handle your money and who has a similar degree of risk tolerance. Don’t be afraid to ask for referrals or pose some hard questions – an experienced professional will expect you to walk them through their paces before making a decision.


To learn more about your tax filing options, check out the other guides in this series:

Why You’re Filing Your Taxes Wrong

Tax Software: The Down and Dirty

Do-It-Yourself: Not for the Faint of Heart

Big-Box Preparers: Buyer Beware


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