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MiddletownJournal.com

Ask questions before picking a paid preparer

By EILEEN ALT POWELL

The Associated Press

More tax tips: This year's basics  Making the most of deductions   Don't-even-think-about-it deductions   Do-it-yourself tax preparation   Software to speed the process   Resources for quick help   Filing for free   1.7 million unclaimed refunds  Recent Hank columns: Prompt filers will receive tax refunds quicker than ever  A new year calls for a new financial plan  Now's the time to assess spending, saving habits  More "Bank on Hank"

How do you know whether you should consult a professional? Where do you begin looking for one?

Donna LeValley, a tax attorney and contributing editor of J.K. Lasser's "Your Income Tax 2005," said the main reason people seek help is that there's been a big change in their lives.

"Anytime you have a major life event — a marriage, the birth of a baby, the purchase of a home — you might want to consult a tax professional," LeValley said.

Other events that could send taxpayers in search of help include dealing with an inheritance or calculating the tax liability on the sale of stocks, she said.

Tax preparers have varying degrees of training and certification.

Certified public accountants, enrolled agents and attorneys can prepare tax returns and represent taxpayers before the IRS.

CPAs must complete a series of training programs and pass a national exam before they are licensed by states, while enrolled agents are licensed by the federal government. Attorneys must pass bar exams in the states where they practice.

These professionals also help with long-term tax planning.

Commercial firms such as H&R Block Inc. and Jackson Hewitt Inc. train thousands of tax preparers a year to help mainly low- and middle-income families with relatively uncomplicated returns. These preparers are allowed to work on returns and answer questions for the IRS; the companies also have enrolled agents to represent clients in disputes.

Bob D. Scharin, a tax attorney who edits a tax strategy newsletter, said one of the best ways to find a good tax professional is to ask family and friends for recommendations.

According to Scharin, the basic questions for any preparers are:

•  What are you going to charge?

•  How and when will I be billed?

•  When can I come back and pick up my completed tax return?

•  What happens if I have issues with the return? Will someone be able to make necessary changes, and is there a fee for that?

•  If I'm audited, will you represent me?

Scharin noted that the IRS in recent years has been cracking down on fraudulent tax preparers but that rogues can escape the federal net. There are red flags that should prompt taxpayers to avoid some preparers, he said.

"If a person tells you the fee is based on the size of your refund, I'd be concerned," he said.

"I'd also think twice if the person is pushing some special way you can get away with paying no tax, like establishing a religious organization to shelter all your income."

The IRS also warns taxpayers to be wary of preparers who push taxpayers to inflate expenses, create deductions or claim excessive exemptions.