How to find a good tax professional

Tax preparation is a big business. You’ve probably seen little cubicles set up in malls during tax time, or maybe you’ve seen a sad kid wearing a Statue of Liberty costume, twirling a sign in front of a strip mall from February to April. There are internet-based tax prep services that will electronically file your returns after they prepare them, and of course there are professional EAs and CPAs who sit behind a desk and can answer your questions year round. The fact is, there is no shortage of services available to help you file your taxes.

Of course the question is, how do you know you’re going somewhere good? How do you know you’re not wildly overpaying, or at least being given the right options to consider? One thing you can do is to gather up all of your documentation and visit a bunch of tax preparers in your area. You will spend a few hours with each, and whether you hire them or not you will likely have to pay them for their time. So if you’re willing to spend hours and hours of time, plus several hundred dollars, you might find someone who will do a good job. Wait, that sounds like a total waste. Don’t do that. Let’s find a better solution.

Let’s look at the types of tax preparers first. The first one is what we call a “guy.” It’s just any random person who will help you, maybe for money, or maybe because you helped him fix his car. Unlike many professions, there is no law that says that you can’t hire any old random Joe off the street to help you prepare your tax return. Generally speaking, we don’t recommend having any old untrained “guy” do your taxes. If you visit someone in a superstore kiosk you might be getting a well-seasoned professional, and you might also be getting someone who passed a training course the week prior. In either case they’re not going to be around once tax season ends, and they’re not going to be able to represent you before the IRS. At a minimum, you should choose a tax firm that can represent you if you happen to get audited.

Even though anyone can prepare a tax return, there are only three types of tax professionals who can represent you before the IRS. In other words, the “guy” you know who can help you might be able to fill out the forms, but if you get audited he’s not allowed to represent you. The three professions who are designated to represent you before the IRS are an Enrolled Agent, a Certified Public Accountant, and an Attorney. 

So what’s the difference? Attorneys go to law school, pass the state bar, and some choose to specialize in taxation. Certified Public Accountant (CPA, for short) is a title bestowed on people who have passed their state’s CPA exam, which includes some material on taxation. The test also covers “attest” work, financial reporting issues, and more. The one you’re likely not familiar with is an EA, or Enrolled Agent. An EA is a nationally-recognized designation that means someone has passed a three-part exam that strictly covers the tax code. It’s the highest credential awarded by the IRS, and the exam goes much deeper into taxation than the CPA exam or the Bar exam. 

When it comes to choosing a professional to help you with your taxes, we strongly recommend finding someone who is either an EA, a CPA, or an Attorney who specializes in tax preparation. As long as they have one of those designations they have passed our first recommended filter. Of course, that’s not the only filter we recommend - plenty of tax preparers are very skilled at reviewing your information and accurately preparing your tax return, but the fact is that if you only speak to them at your appointment in February, you’re missing out on some big opportunities for tax savings. A good tax person is busy all year long: They’re either working on preparing tax returns for tax deadlines, they’re booked solid with tax planning appointments, or they’re involved with training to learn the new tax laws. 

With that in mind, let’s look at some questions you can ask prospective tax professionals before you commit to one.

Do you offer year end tax planning?

December 31st is the hard cut off for almost anything you can do to save taxes for a given year, so a good tax professional will want to meet with you late in the year to go over your numbers and strategize some things you can do to help yourself before January 1st. 

Do you proactively contact clients with ideas for their businesses?

Tax professionals are constantly learning new ideas (or they should be!), and when a lightbulb goes off in their heads with something that will benefit their some of their clients, they should contact those clients as soon as possible. At the risk of generalizing, a lot of tax professionals are not outgoing to the point that they will pick up the phone and call their clients when they have a great idea. You might decide you want a tax professional who makes more frequent contact than once or twice per year.

Do you send out a newsletter? 

If they aren’t the type to pick up the phone, maybe they collect all of these ideas and send out a newsletter periodically. If so, you should ask to take a look at a recent one to see if it’s simply an advertisement for services or if there are actually some great ideas and strategies contained in it. Of course, if they don’t have a newsletter that’s ok as long as they’re the type to call or email when inspiration strikes. 

Do you have other clients with businesses similar to mine? 

Depending on the particulars of your business you might want a tax professional who is experienced in that particular field. Not every business is so complicated that it needs a specialist tax pro, but it makes sense to discuss your business in great detail and ask if they work with clients who face similar issues. He or she should be able to talk to you about their clients and how they have helped them, which should give you an idea of their level of expertise with respect to your business. 

Finally, talk to your friends and network with colleagues to find a tax professional you trust, and don’t be afraid to change things up if your current tax professional isn’t performing as you expect. They’re not magicians, and if you bring them a mess in late March don’t expect a miracle by mid-April, but if you can find someone who will work with you throughout the year and who is passionate about helping your business grow you will be much better off.