FINANCIAL FOCUS: Tips on choosing — and using — a tax preparer

Joe Faulk

Joe Faulk

Published: Wednesday, March 12, 2014 at 18:45 PM.

When you started out in adult life, things were probably simple: no house, no spouse, no kids and few investments.

So, when it came time to do your taxes, you might have gotten along just fine by using Form 1040EZ — which, as the name suggests, is pretty darn easy to use.

However, fast forward a few years, and here you are today: family, mortgage, 401(k), IRA, stocks, bonds, debts and charitable contributions.

Now, when you sit down to do your taxes, they're looking a lot more like your high school trigonometry. If that's the case, it might be time for you to get some help.

However, anyone can claim to be a "tax preparer." But how can you find the one that's right for you? Here are a few tips:

Check credentials. While your brother-in-law, your barber and your daughter's friend who is really good in math all may be able to do your taxes, none of them will be as familiar with tax laws as a CPA, a tax attorney or an "enrolled agent" (an individual licensed by the U.S. Treasury Department to represent taxpayers before the Internal Revenue Service). So, before you hand over your tax returns to someone, ask about his or her credentials and experience. If your taxes are too complicated for you to handle, you need a professional.

Get references. Ask your friends, relatives and co-workers who they use for their taxes, and if they're satisfied with this person.

Avoid preparers who promise "big refunds." No reputable tax preparer can guarantee you a big refund — or any refund — before looking at your taxes. Stay away from these people. Also, avoid tax preparers who base their fee on a percentage of the amount of the refund. While refunds are nice, you don't want one that might invite serious questions, or an audit, from the IRS.

Get organized

Once you have chosen a professional to do your taxes, what can you expect? Can you just toss a shoebox full of receipts, investment statements and pay stubs at your preparer and then wait for your return?

It's not that easy. Even if you use a tax preparer, you're going to have to do some work, too. Try to be as organized as possible with your documentation.

For example, you may want one envelope devoted solely to investment information, one to earnings, one to charitable gifts, one to other deductions, and so on. The more organized you are, the easier it will be for your tax professional to complete your return in the most favorable manner possible.

However, don't assume that what you're giving to your preparer is sufficient. If you have sold shares of stock, make sure you've got the cost-basis of those shares available. If this information is not printed on your statements, call your investment professional to get it.

Here's one final tip: See your tax preparer as soon as possible. Once the tax season gets into late March, you'll find few people anywhere as harassed and harried as tax preparers — so give them the time they need to help you.

Joe Faulk is a financial adviser.

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