Home > Taxes > A Brief Guide to Never Doing Your Own Taxes Again

Comments 0 Comments

Maybe you wasted this past beautiful holiday weekend working on your taxes. Or perhaps, despite warnings about taxpayer ID theft, you still have midnight oil to burn between now and the April 15 deadline. Either way, you have probably mused, for at least a moment, that this will be the last time you do your own taxes. After all, by plenty of measures, tax prep is getting more and more complicated.

So if you are ready to delegate tax work, now is the time to plan for the 2015 filing season. Here’s some help about the choices you face — specifically, on the kinds of tax preparers you might hire to help you.

First off, you should know that hiring someone else to do your taxes might not be the Shangri-La you imagine. Whoever that person is will still require you to provide a lot of paperwork and do a lot of legwork. You might wonder if you are really saving time at all. Sure, it’s a relief to know a professional is doing the math, and that might result in greater accuracy, but even that isn’t certain. In fact, when Congress’ General Accountability Office studied the issue, it found higher error rates on “pro” returns than self-prepared returns.

Of course, that only means not all tax prep work is the same. In fact, in most places in America, anyone can become a professional tax preparer.

“Anyone can hang out a shingle as a tax return preparer, with no knowledge, no skill and no experience required,” lamented Taxpayer Advocate Nina Olson in congressional testimony during last year’s tax season.

The Internal Revenue Service has tried to require some kind of license for retail tax preparation firms, but so far, that hasn’t happened. Voluntarily certification is available, and you might ask a retail prep agent if he or she has completed the necessary coursework for that. But only four states — California, Maryland, New York and Oregon — require formal certification for tax preparers. That’s why you might consider moving up the value chain for tax help. That leaves you with three other popular options: Certified Public Accountants, Enrolled Agents, and tax attorneys. Never heard of an “enrolled agent?” You’re not alone. Read on to find out what each designation means.


First, the most common choice for people who need help with various money issues, including taxes. If you’ve spent hours pulling your hair out while trying to do your taxes — particularly if you are part of the growing list of Americans who earn self-employment income — now is the time to start interviewing potential CPAs. Well, not “right” now. Give them a few days to sleep after April 15. Then spend some time getting to know a couple.

Tax prep help is only one of the services that CPAs offer, and it’s probably not the most important one. CPAs can offer yearlong money advice, such as how to set up an accounting system for your small business, or how to do some basic estate planning. If things work as they should, tax time will be (relatively) easy because your CPA will already have a good understanding of your financial picture. Of course, that kind of handholding isn’t cheap. But if you go easy on the financial advice and use a CPA primarily for tax purposes, the costs shouldn’t be too bad. Back in 2013, the National Society of Accountants did a survey and found the average cost for filing an itemized tax return and one state return was $261 for roughly five hours or work. Costs vary wildly based on region and complexity, of course.

How do you find a CPA? It’s always useful to talk with friends, but never forget the lesson of Bernie Madoff, who got nearly all his new clients via friends — never rely wholly on someone else’s judgment of character. You should always do your own background check, verify current licensing, etc. The American Institute of CPAs is a good places to start your search.

When picking a CPA mainly because of taxes, make sure your CPA specializes in taxes. CPAs can have a variety of specialties — from small business advice to estate planning. Pick yours because they enjoy doing the work you need done.

One critical factor: CPAs are certified by states, as opposed to “Enrolled Agents.” We’ll see why that’s important in a moment.

Enrolled Agents

If you have never heard of this designation, it probably means you’ve never had serious tax trouble, so consider yourself lucky. But enrolled agents are making a push into the mainstream lately — they even have a new branding effort called “Enrolled Agents — America’s Tax Experts.”

Here’s why you should consider hiring one: Thanks to their low name recognition and their sole focus on taxes, they can be less expensive than CPAs, and are almost always cheaper than tax attorneys. Also, because they are federally certified, they are a good choice for taxpayers who might need to file returns in multiple states.

It’s an exclusive group — there are only about 50,000 enrolled agents nationwide. Among the chief benefits of an enrolled agent: If you are audited, you can be represented by an EA. Taxpayers with complex returns might also consider enrolled agents. They are tax specialists, and they are required to take 72 hours of continuing education every three years.

How do you find an enrolled agent? The National Association of Enrolled Agents website is the best place to start. You can also verify enrolled agents at the IRS website.

Tax Attorney

Tax lawyers aren’t only for trouble. Individuals with high net worth or small businesses might consider involving a tax lawyer early on. A tax lawyer can help set up business structures and help you make sensible, defensible tax choices during the year. With this high level of service comes a high price tag — bank on at least $200 to $400 an hour to start. If you need help resolving a tax issue, count on at least $1,500 to $2,000 for even the simplest case, according to TrustedTaxAttorney.net. This cost is the single most important reason you should get to know enrolled agents; they can represent you in an audit, or before the IRS for any tax issue, for a lot less.

Whatever choice you make, it’s important to recognize this critical fact: Even if you get bad advice, and even if you pay someone a lot of money and that someone makes a mistake, you are the one responsible for paying the IRS what you owe. If you underpaid your taxes, you’ll owe the IRS and will have to pay Uncle Sam back with interest. So choose your help wisely. And however painful it is, always double-check the work that’s done.

More on Income Tax:

Image: Stockbyte

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Credit.com receives compensation for the financial products and services advertised on this site if our users apply for and sign up for any of them.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team