The Checkout

Who's Preparing Your Taxes?

Did you hire someone to prepare your taxes for you this year? If so, don't miss my colleague Al Crenshaw's story today, Some Tax Preparers Don't Add Up. In a small study run by the Government Accountability Office, commercial tax preparers made errors, sometimes amounting to more than $1,000 in incorrect refunds and overpayments, in 100 percent of returns brought to them by a government agency seeking to test the accuracy of work done by large chain tax-preparation firms.

The GAO does say that the study is small and can't be used to generalize the entire tax preparation industry. Even so, it can't hurt to check out the IRS' tips on choosing a tax preparer.

By  |  April 5, 2006; 8:02 AM ET Consumer Alerts
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Comments

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I used an accountant a few years ago to prepare my taxes and found he made more mistakes than I did. I am glad I double checked everything he did - I would never hire someone to do my taxes without double checking everything. Please don't assume the preparer knows better and insist on reviewing it yourself.

Posted by: diy-er | April 5, 2006 10:51 AM

For simple, low income tax payers, there is no need to pay a CPA do file your return. However the more complex you taxes get the mor einvolved the tax law becomes and the harder it is to be sure you are accurate. If you strugle with your taxes pay an accountant, but remember they can not read minds and it is up to you to provide the information they need.

Posted by: Anonymous | April 5, 2006 12:05 PM

I used Turbotax software this year plus read through IRS booklets and website. It is soooo much cheaper than paying H&R block hundreds of dollars! Last year we had to pay over $250 for a tax return that took the accountant about 20 minutes to prepare--never again.
Actually, I think IRS must provide tax software to everyone for free. It's not luxury, it's a necessity. I tried doing my return using free paper forms, but couldn't figure it out.

Posted by: Elle | April 5, 2006 12:07 PM

I made the mistake of using H&R Blockheads online one year. I still did the return myself, but I paid for some advice on a question, and after many more exchanges than should have been necessary, she still got it WRONG. When I had time to review it and found the mistake, I filed an amended return for a much bigger refund and a complaint with the BBB. I finally got my fee back from them, but what a pain. And they never acknowledged that their "expert" almost cost me much more than the cost of the fees they charged me.

Posted by: The Cosmic Avenger | April 5, 2006 12:09 PM

I agree with Elle, there are so many interview-based tax programs that the IRS should just buy one or write their own and offer it for free, and most painful for me, ALLOW ONLINE FILING FOR FREE. It would probably pay for itself in increased compliance.

I was done, but I just can't get over that you can't submit your own return electronically. You have to pay a company to do it for you. The state of Maryland allows individuals to file electronically, even the long form. But even if I fill out EVERYTHING myself, I can't submit my return electronically unless I pay someone to use their web site or program and submit my return to the IRS for me. What a bunch of leeches. I've gone back and forth from electronic submission to paper returns in the mail because of this, but it's just much faster and more convenient for me to file electronically, so I usually pay for bare-bones filing on the web with TurboTax.

Posted by: The Cosmic Avenger | April 5, 2006 12:15 PM

I worked for H&R Block several years ago in Laurel and would never have them do my taxes. The preparers work on commission based on the cost to you of preparing your return, with extra incentives for talking someone into the refund loan. It was impossible to get any fellow employees to help on a complicated return because they would lose money by taking time to help you. Some of the preparers were so inept they were scary. Beware!

Posted by: Anonymous | April 5, 2006 12:15 PM

I used TurboTax online to do my dog's return this year - I was not about to put my financial information online unless it worked well. However, it turned out not to be robust. Eventually, it requested so much input on my part for the AMT calculation, that I prepared the return myself.

Posted by: Ray | April 5, 2006 2:17 PM

For years I was using a paid tax preparer and after being audited by the IRS and my preparer (whom I've used for several years) was none responsive to my phone calls, I learned my lesson. I went back to using doing my own with the help of TaxCut or TurboTax.

Posted by: Disappointed with paid preparer | April 5, 2006 2:45 PM

I use online tax preparation for not only myself but 10-12 people who ask me to do their taxes for them. You can go to irs.gov where they can steer you to a free filing service based on several criteria, such as income, state you reside in, age, etc. Almost anyone can file for free, even if you itemize deductions. It's so easy. I csn't imagine anyone not being able to file this way.

Posted by: Online tax guru | April 5, 2006 2:50 PM

I used a paid tax preparer for the first time this year. He made a $13,000 mistake on my itemized deductions. Fortunately, I caught it since it was so obvious. From now on, I'm sticking to Turbo Tax...

Posted by: Laurel_MD | April 5, 2006 2:54 PM

It's not fair to individuals in the business of preparing income tax returns to generalize based on a judgmental sample of 19 complicated tax returns. As someone who has prepared income tax returns all of my life, it has been my experience that as long as the taxpayer adequately describes and documents his/her situation to the preparer, and the preparer understands the taxpayer's situation, the income tax return submitted to the IRS is accurate.

Posted by: Jesse, Tax Preparer in KY | April 5, 2006 5:16 PM

Please note we are now called the Government Accountability Office, not the General Accounting Office.

Posted by: GAO Employee | April 6, 2006 12:53 PM

I must agree with Jesse's comments. As a CPA with more than 15 years of tax return prep experience, I can tell you that the most common reason for errors on tax returns completed by paid preparers is the failure of the taxpayer to adequately describe and document his or her tax situation. Preparing your own return with Turbo Tax or some other product is not always a good idea, especially if you have a Schedule C, property sales, rental properties, etc. I can't tell you how many self-prepared returns I've had to fix over the years. If you have W-2 wages and some bank interest, by all means, go to a chain preparer or do it yourself. If you have any of the more complicated items as listed above, choose an enrolled agent or CPA. Anyone who is seriously in the business of tax return preparation would have one or the other credential. A realtor who was helping me purchase a condo asked me what kind of work I do. When I responded that I was a CPA, she said that her hair stylist prepares her tax return! When you take your tax return to ANY preparer, make sure they understand your situation. For instance, if you are not a US citizen and you have foreign income and travel abroad frequently, be sure your preparer has experience with your situation. Some people will always complain about paying for tax preparation. Taxes are complicated. Develop a relationship with a good tax professional. That's what people with money do. Take the hint.

Posted by: David, CPA in FL | April 13, 2006 10:11 PM

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