How to Select a Trustworthy Tax Professional

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It gives one pause to hear H&R Block recently paid out $20.2 million to settle a lawsuit accusing the tax-preparation company of widespread fraud. According to the State of New York, H&R Block aggressively peddled fee-laden retirement accounts virtually guaranteed to cost millions to families across the country.

If you can't trust H&R Block, who can you trust?

Who you choose as your tax preparer and what you pay for this service naturally depends on the complexity of your personal tax situation, but you may want to consider the following before making your selection.

1. Who should seek help
If you simply need help with the IRS Short Form, you likely won't need a high-priced tax professional. But even if you file Form 1040A, you might still overlook your eligibility for some tax advantages. While you may need some help, hiring a CPA or a tax attorney is "overkill" in these situations. You often can find low- or no-cost assistance on certain days at your local library, senior center, legal-aid or other non-profit organization.

However, if you're a small-business owner, self-employed or have some other complicating factors, you'll likely want to hire a CPA or tax attorney.

2. Credentials
Some states don't require licensing of tax practitioners, allowing anyone to call themselves a tax preparer. In addition, an individual might have credentials generally associated with tax knowledge and not be qualified to prepare non-routine individual tax returns. Make sure your tax preparer has the necessary education and experience to competently prepare a wide array of individual tax returns. A tax attorney or a CPA who specializes in individual income tax law is obviously qualified, but many CPAs and attorneys only learn and practice corporate taxes.

Competent tax preparers must continually educate themselves on the ever-changing tax laws. Look for a professional with Enrolled Agent status, indicating they have passed an intensive exam administered each fall by the IRS. Those with experience in teaching tax preparation at a recognized school can also be considered quite competent.

3. Accuracy
The IRS does not issue multiple-choice forms. There is only one correct result for your return; the one that allows you to pay the least legitimate tax or receive the largest refund possible. Since anyone can make a mistake, you may want to have your return checked for both mathematical and theoretical accuracy by a second tax specialist. Using good tax software can help ensure thoroughness and accuracy.

4. Professionalism
A true professional should help you complete the process with the least pain. Expect a pleasant office atmosphere with reasonable privacy, comfort and strict security. If you feel you're just another number in a production line, find another tax preparer.

Ask about professional affiliations, references and memberships in such organizations as the Better Business Bureau and the Chamber of Commerce. Check with these agencies for any complaints registered against the tax professional.

5. Personal Service
Your preparer should be thoroughly familiar with your financial situation to help you make decisions that will minimize your taxes. They should keep you informed of tax laws relating to your situation, so you can make related decisions throughout the year. By the end of your interview, all your questions should be answered and you should have a written list of items, if any, you need to provide the tax preparer.

6. Convenience
Many of us only have time to meet with a preparer in the evening or on the weekend. You'll want a preparer that's available when most convenient for you, not them. You also should expect relatively fast service. If you met with the preparer in early February, they shouldn't be filing your return the evening of April 15.

7. Availability and Guarantee
Before you contract with a preparer, make sure they are answerable for any mistakes that cost you money, will be available if you are audited by the IRS or will respond if you aren't satisfied with your return.

8. Price
According to IRS law, tax preparers can't base their fees on the amount of tax refund you receive. Many charge by the hour, others operate from a schedule of charges related to the number of forms filed, and some simply charge "the going rate." The best situation is to hire a tax professional with the level of expertise you need at a price you can afford. Ask for an estimate before beginning work and avoid tax preparers who won't disclose the basis for their fees in advance.

9. Referrals
Ideally, a friend, co-worker or business associate can recommend a qualified tax professional they have used for several years. As with selecting a hairdresser or auto mechanic, this often is the best way to make your choice.