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Who Needs a Tax Preparer?

It is not necessarily your level of income, but rather the complexity of your return that determines your need for a tax preparer. If you have experienced a major lifestyle change, such as a divorce or a drastic change in your financial situation, you want to hire a tax preparer. Other factors that may trigger the need for professional help include owning a home-based business, claiming substantial itemized deductions, or owning rental property. Similarly, you should probably seek assistance from a CPA or tax attorney if you need to claim a major casualty loss, account for a change in child custody, or deduct investment-related expenses.

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Types of Tax Preparers

• Local Tax Services – Offices that open up in rented storefronts just during tax season.
   
• National Chains – National chains or other commercial services offer convenience. During tax time their offices are open nights and weekends, and you can walk in for service on a first-come-first served basis. Their staff is required to undergo some instruction and training before being hired. However, these tax preparers range from beginners to experienced personnel that do tax work only seasonally as a second job. Bear in mind that these local services and national chains are considered Unenrolled Return Preparers by the Internal Revenue Service (IRS) and have limited powers of representation before the IRS.
   
• Enrolled Agents – An enrolled agent (EA) is a Federally Authorized Tax Practitioner who has technical expertise in the field of taxation and who is empowered by the United States Department of the Treasury to represent taxpayers before all administrative levels of the IRS for audits, collections, and appeals. EAs prepare millions of tax returns each year.
   
• Certified Public Accountants – A CPA is licensed by a state authority to practice public accounting. CPAs are distinguished from other accountants by stringent licensing requirements. To qualify for certification and a state license, an individual must have a college degree, passed the Uniform CPA Examination, and meet certain experience requirements. CPAs are also required to take specified amounts of continuing professional education to retain their professional licenses to practice. CPAs can prepare tax returns, suggest tax strategies, minimize tax liability, represent you before the IRS, and more.
   
• Tax Attorneys – Tax attorneys can advise you on tax and financial planning, and a specialist may be well informed on tax laws and their applications. They also specialize in handling tax disputes. They usually don’t prepare returns and their fees are higher than those of any other tax preparer.

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Why Choose a CPA?

If you believe that only the rich and famous need the services of a CPA, think again. CPAs act as advisers to individuals, businesses, financial institutions, nonprofit organizations, and government agencies on a wide range of financial matters. Many individuals turn to CPAs for help with both their tax preparation and personal financial planning. People rely on CPAs for assistance in building college funds, planning for retirement, and creating estate plans.

Additionally, CPAs are governed by a Code of Professional Conduct – one of the most exacting of any profession – which stresses independence, integrity, objectivity, technical competence, and adherence to professional standards. This Code emphasizes the CPAs commitment to serving and protecting the public interest.

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Assessing your Situation

Don’t wait until April 15 to determine that you need professional help to complete your tax returns. Begin assessing your tax situation prior to the end of the year. A recent marriage or divorce, the birth of a child, a career change, or an especially generous bonus all can have significant impact on your tax liability and personal financial goals. Sometimes, specific actions taken prior to the end of a tax year can help to minimize your tax liability.

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How to Choose the Right CPA as your Tax Preparer

• Referrals – Referrals from friends, neighbors, and co-workers are one of the best ways of locating a CPA. Business people, especially those in your field, can also be of help. So can lawyers or bankers. Be sure these people have actually used the preparer. Ask them about the quality of the preparer’s work, responsiveness to questions, and ability to complete the return in a timely manner.
   
• Shop Around – Don’t rush to hire the first tax preparer with whom you speak. Contact several preparers and ask them to discuss their qualifications.
   
• Ask About Fees – When interviewing a prospective tax preparer, be sure to ask them about fee structure. Some will charge on an hourly basis, others on the number of forms to be completed, and still others will give you a fixed price. How your records are organized will have an effect on the fee structure. You may also want to ask the preparer if he or she will reimburse you for mistakes that result in penalties or interest charges.
   
• Evaluate Standards and Experience – Consider how long the tax preparer has been in business and whether they work full-time or part-time. Ask whether they are members of the Ohio Society of Certified Public Accountants and the American Institute of Certified Public Accountants.
   
• Hire for the Long Haul – If you think you’ll be using a tax preparer in future years, be sure the individual you retain to do your return can meet your needs today as well as in the future. For example, if you anticipate a big change in your finances over the next year, it may be wise to retain a tax professional who can help you to devise an effective tax-planning strategy long before your tax return is due.

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Precautions 

• Go over your tax return thoroughly. Although the preparer may not necessarily ask to see all your documents or request proof of the figures you give, they are not responsible for processing false information they understood to be true.
   
• Remember that the person ultimately responsible for the tax return you file is you. Taxpayers are legally responsible for what’s on their returns – even if prepared by someone else. Even if your tax preparer makes an error and underestimates your taxes, the IRS could still charge you with penalties and interest. It would be your responsibility to pay these costs.
   
• Never sign a blank return or a return prepared in pencil.
   
• Don’t let the fee structure alone effect your selection of a tax preparer. An individual who charges more, but has a reputation for quality work, may help you avoid costly mistakes and save you more money in the long run.

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Preparers to Avoid

• Avoid preparers who claim they can obtain larger refunds than other preparers, guarantee results, or base fees on a percentage of the amount of refund.
   
• Avoid any preparers who are unwilling to sign your return. Paid preparers are required by law to sign the return, fill in the preparer areas on the form, and give you a copy of the return.
   
• Avoid preparers that are difficult to get hold of after tax season. Some preparers work very little after tax season and are difficult to contact if issues arise. Get references from existing clients. Were they satisfied with the service received?
   
• Avoid preparers with a questionable history. Check with the Better Business Bureau, the Accountancy Board of Ohio, the Attorney General, etc.

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Getting More for Your Money

Once you’ve selected your tax preparer, you should realize that he or she needs a clear and complete understanding of your economic life and tax situation. You can assist your CPA by taking the following steps:

• Take a copy of your last year’s return the first time you use this preparer and inform the preparer of known changes from the prior year to the current year.
   
• Compile all documents and other information you think may apply to your taxes. You can save time and money by being as organized as possible.
   
• Make a list of questions you want to ask your CPA and inform your CPA of the goals you have set for your financial future.
   
• Try to keep up on some of the tax law changes that you feel might apply to you.
   
• Contact your preparer early, as soon as you have compiled the documents you need. Remember that the closer the tax deadline gets, the busier the tax preparers are and the less time you have to gather missing information.
   
• Keep your CPA informed of changes in your personal and professional life.

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