If you still cannot face the idea of doing your own taxes or if
your taxes are too complicated — you exercised stock options last
year, you got divorced, you plan to depreciate the portion of
your house that you use as a home office — enlist human help. But
when hiring a tax preparer, first consider the person's
experience. And make sure you understand your return, even if a
pro does it. If he or she makes a mistake, you are responsible
for any extra taxes, late charges, or penalties. If you're ever
audited, you may be the one who has to defend your deductions;
only enrolled agents (tax practitioners licensed by the federal
government), accountants, and tax attorneys can speak on your
behalf. So go directly to one of them if you're concerned by this.
TAX-PREPARATION CHAINSThe storefront offices of H&R Block, Jackson Hewitt Tax Service,
and other national companies charge less than other tax firms
(about $100 per return) and are good at the basics, like filing a
1040 form, itemizing deductions, and reporting capital gains.
CPAS AND ENROLLED AGENTS If your financial life is more involved, then upgrade to an
enrolled agent or a CPA (certified public accountant). CPAs are
state licensed, have earned a bachelor's degree, have passed a
strict national test, and must meet continuing
professional-education requirements. Any CPA you consider should
also be a member in good standing of the American Institute of
Certified Public Accountants (you can check membership status by
calling 888-777-7077). CPAs' fees vary widely, depending on how
complicated your return is, what part of the country you live
in, and whether the accountant works for a big or small firm.
(The "Big Five" accounting firms, such as Ernst & Young and
Arthur Andersen, generally charge more than small, independent
companies.) Enrolled agents, on the other hand, usually charge
less than CPAs (about $200 for a typical 1040) and are former
IRS employees or have passed a comprehensive exam given by the
IRS. Enrolled agents must also take 72 hours of continuing
professional-education courses every three years. With either a
CPA or an enrolled agent, be sure to ask what recourse you'll
have if the preparer makes a mistake on your return. Some firms
will pay any interest or penalties that result.
