Interviewing an Accountant/Tax Preparer
For those without a big income or who have simple, uncomplicated lives (single, no children, no deductions), filing a tax return can be pretty EZ (to quote the code of the Internal Revenue Service form for a straightforward tax return). Once you leave the realm of simple tax returns, however, you must decide if you are the best-qualified person to deal with the tax code, get the most from its credits and give-backs, and to properly make your case to the IRS.
If you are picking a preparer to use for the foreseeable future, you should start your search by acknowledging that the person who prepares your tax statements knows your deepest secrets, things not even your family may know about you, such as household income, investment returns, and more. It must be someone who can draw out that information, be trusted to keep it confidential and use it to your advantage, while staying securely within the boundaries of the law.
The challenge for an individual looking to hire a tax preparer for the long haul is finding the right match of competence, expertise, price, and attitude toward dealing with the IRS.
Can I Do This on My Own?Of all financial jobs, the only one that comes with an instruction booklet to get you through the task on a do-it-yourself basis is tax preparation. The IRS sends you that instruction book with your tax return forms.
Since you are entitled to prepare your own return, you don't need a preparer or accountant to do the work. The problem is that taxation without representation may be a really stupid idea.
In every tax situation, there are three solutions: the "right" way, the wrong way, and your way.
The right way gets every allowable deduction without stretching the truth or making you vulnerable to penalties or a problem if you get audited. It generally involves not only doing the paperwork necessary to complete a tax return, but occasional phone calls throughout the course of the year to allow for tax planning. The right way is not necessarily letter-of-the-IRS tax advice, because officials in that agency acknowledge that there are many ways to do a tax return. It depends on how aggressive you want to be in taking deductions and pursuing opportunities; go for too much, and you get into trouble, pursue too few opportunities and the IRS gladly will accept all the extra money you are willing to pay.
The wrong way is slap-dash and sloppy, thrown together to beat the deadline or simply to get out from under the pressure of filing. It may involve stretching the truth or trying to take deductions that you fear the IRS will disallow. It will cost you interest charges and penalty payments, or will simply result in your paying more tax than you need to pay.
Then there is your way, which is probably somewhere between the other two. You will likely find that aiming for the perfect tax return involves shooting at a moving target. The idea is as come as close as possible to the ideal return for someone in your particular situation.
If you don't feel comfortable doing that on your own, hire someone who can. A good advisor will earn back his or her fees -- and save you time, stress, and aggravation -- by properly minimizing your taxes due.
That's harder than it sounds because anyone -- literally, anyone -- can be a tax preparer. By law, you might be unable or unwilling to do your own taxes, but you could hang out a shingle, promise to help people and sell your miserable tax-preparation services to others.
While tax preparation seems like one of the easiest roles to fill on your financial team, it is also one of the most subjective spots, because the right relationship depends so much on the two of you having the same approach to dealing with Uncle Sam. If you want to minimize taxes and are willing to risk raising the proverbial "red flags" that can increase your chance of audit to do it, you'll want a preparer who is comfortable taking those same risks when handling your documents.
By Chuck Jaffe