Tax Accountant: How to Have the Best Experience With One

If your taxes are complicated, you may need a tax accountant. Photo: Steven Depolo, Flickr

When it comes to preparing tax returns, it's well worth considering hiring a tax accountant for assistance. After all, even National Taxpayer Advocate Nina Olsen has decried the U.S. tax code as "overwhelming in its complexity." Indeed, the number of pages in the instructions for the 1040 form has soared  from two in 1940 to 207 in 2013. The tax code in its entirety recently amounted to 3.7 million words. To better comprehend what that means, that's more than 12,000 books that are 300 pages long.

What is a tax accountant?
So what can a tax accountant offer you? Well, he or she can prepare your return for you -- with the benefit of far greater familiarity with the tax code. Preparing the return on your own might seem like the most cost-effective route, as you can avoid spending perhaps several hundred dollars on a professional preparer, but that person might save you thousands by taking advantage of deductions, credits, and strategies you would miss.

You might use a certified public accountant, or CPA, who specializes in personal (or business) taxes. These professionals have taken many courses in accounting and taxes and have passed national or state exams and acquired required experience in order to earn the CPA title. Some tax accountants will not only prepare your return but can also offer financial planning or estate planning services.

You might do well to use a professional tax preparer every year, but there are some situations in which they can be particularly helpful, such as for real estate or trust fund transactions, when you get married or divorced, when you're self-employed, when you have an active investing life, or when you buy, sell, or run your own business.

Image: Alan Cleaver, Flickr.

How to choose a tax accountant
Tax accountants can be great, but not all of them are. First, be sure the accountant you're considering is experienced in the kind of work you need done -- such as personal income taxes or small business taxes, for example. Seek someone with more than a few years of experience in the work, and make sure the person has a preparer tax identification number.

Do some due diligence research on any contender, too, making sure he or she does not have blemishes on their record. Resources for this step include the Better Business Bureau and your state's board of accountancy.

Ask about the cost of preparing your return, and about the preparer's hours. Ask if he or she will conduct the work or will farm it out to employees. According to the National Society of Accountants, in 2014, the average cost of preparing a tax return with itemized deductions and a state tax return was $273. Without itemized deductions, it was $159. These are just averages, but they'll give you some context as you shop around. Some regions are more costly, and additional services will cost extra. The average cost of preparing Schedule D, for gains and losses, for example, was $115 last year.

Ask about professional affiliations, certifications, educational background, and licenses -- and feel free to ask for references, too. Ask what will happen if you're audited, and what the tax accountant will need from you to prepare your return. Above all, be sure you're comfortable speaking and working with the tax accountant you're considering.

How to make the most of your tax accountant
If you're tapping the services of a tax accountant, find out what he or she offers and take advantage of that. If you have some tricky tax questions that would take you a lot of time to research, your tax pro might know, or be able to quickly determine, the answer. Remember, too, that you can probably consult the tax accountant about other questions throughout the year, if you are a client. A major benefit in using a professional is the amount of time you'll save.

Next, you'll get best results by being organized and early. If you dump a shoe box of receipts on a tax accountant's desk in mid-April, you're not likely to get the best service. Collect relevant tax documents and information throughout the year, perhaps in a designated folder. And once all your 1099 forms and any other required documents have arrived, take them (or copies of them) to your preparer.

Image: State Farm, Flickr

Alternatives to tax accountants
If you want a professional to prepare your tax return, a tax accountant isn't your only option. You might just head to an H&R Block, Liberty Tax, or Jackson Hewitt outpost, for example. That can cost less, as those offices tend to be staffed with less trained seasonal workers, but they might serve you well -- particularly if your situation is simple, perhaps not requiring itemized deductions.

Enrolled Agents are a solid alternative to a tax accountant, as they must pass a professional exam and/or have worked for the IRS, and are required to take continuing education courses regularly. They're immersed in the tax world and often have specialties, so it's worth finding one who best fits your needs. (You can look for any disciplinary actions or licensing issues via the IRS Office of Enrollment, as Enrolled Agents are licensed by the IRS.) They will often sport lower rates than tax accountants. If you're audited, only a tax accountant, tax lawyer, or Enrolled Agent will be permitted to represent you.

Consider tax-prep software, also. It's far cheaper than a good professional and generally pretty good. But it won't discuss your finances with you in person, and isn't likely to offer long-term strategies. (Professional preparers you hire will likely also use software, but their software is more robust and sophisticated.)

However you go about it, take your tax-return preparation seriously, as you might end up paying Uncle Sam less than you anticipated.