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Ask Farnoosh: Best Practices for Hiring a Tax Preparer

Steve writes: Any recommendations for things to know or to ask before hiring a tax accountant or tax preparation service?
With the clock ticking closer to the April 15 tax-filing deadline, you may be anxious about getting your paperwork done on time and accurately. In that case, I think working with a tax preparer or accountant could be a smart investment -- and it’s relatively affordable. According to a recent survey by the National Society of Accountants, hiring a tax preparer costs an average $246 to complete an itemized Form 1040 with Schedule A, along with a state tax return. If a tax pro can realize just one deduction or credit you overlooked, that can help to pay for the fee, the NSA says.
Of course, you’ll need to do your due diligence before hiring a tax preparer to ensure you get your money’s worth. Best to begin by asking friends and colleagues you trust for their recommendations and then asking the following questions in an interview either over the phone or in person:

  • Are you a Certified Public Accountant or a tax preparer? Both can handle your paperwork but a CPA may be better-versed in tax code and able to represent you in the event of an audit. “If they’re not a CPA, ask how much tax-related continuing education they attend each year as a CPA is required to sit through 40 hours every year,” says CPA Joshua Jenson.
  • What is your preparer tax identification number (PTIN)? “While there are no certifications required to prepare taxes, there’s still a requirement that anyone preparing a return has a PTIN number and provide it when filing a return. Anyone that doesn’t have it… just walk away,” says Edward Karl, vice president of taxation for the American Institute of CPAs.
  • Do you practice year-round? “What if you get an IRS notice in August on any issue or error on your return? You want a preparer that will be there to assist,” says Jenson.
  • What’s typical turnaround time to receive a completed tax return? You want to make sure they don’t miss the deadline and have to file an extension – which costs more money.
  • If I get audited, do I need to meet with the IRS? “If they say yes, run!” says Jenson. “A qualified preparer that can represent you is a CPA, IRS enrolled-agent or attorney.”             
  • What are your fees? While the NSA has provided some fee averages, the cost to prepare your taxes really depends on the complexity of your paperwork, but it’s reasonable to discuss rough estimates with your preparer and let them know your budget.

Michelle on Facebook asks: How about paying for day care? It's a huge immediate expense, [and] tough to carve out of the budget.
Child care is certainly one of the biggest expenses parents incur. “The cost can exceed that of mortgages and other monthly payments,” says Linda J. Murray, Global Editor in Chief of BabyCenter. The average cost of center-based day care in the U.S. is $11,666 a year ($972 a month), according to the National Association of Child Care Resource & Referral Agencies (NACCRRA), and double that if you live in expensive cities like Boston or San Francisco.
Here are some strategies that could help minimize your costs:
Maximize tax benefits. As a parent you can take advantage of some tax benefits, namely the Child and Dependent Care Tax Credit, where you can claim up to $3,000 worth of child care-related expenses for one child (or up to $6,000 for two or more children under the age of 13). Your employer most likely also offers a Dependent Care Flex Spending Account, which allows you to put aside pre-tax dollars exclusively for child-care expenses. The maximum amount that can be elected is $5,000 for individuals or married couples filing a joint return, $2,500 each if you’re married filing separate returns. [See: IRS Can Help You Look After the Kids]
Consider nanny shares.
Many neighboring parents are reaping the savings of splitting the cost of one caretaker for two to three children. “Home day care can be inexpensive, but be sure to check that the caregiver is licensed,” says Murray.
Negotiate with day care. Ask about working out a more flexible payment plan and any programs that may earn you a discount. “Many facilities will have sibling discounts,” says Murray. “There’s a facility near my office that actually had a discount program for people that live in the neighborhood, too,” she says. You might also qualify for a lower rate based on your family’s income and residence.
Speak with your employer. For a couple reasons, you may want to discuss your rising child-care costs with your manager or human resources department. First, you may learn that your company has child-care services. “Dig into your company benefits. Talk to your HR rep and see what’s available. There could be a center onsite or a deal with a local provider,” says Murray. Second, while this may not be an option for everyone, Murray suggests examining your work schedule to see if you can change your hours and spend more time telecommuting. “For a couple, if each works from home one day out of the week, they can cobble together two-fifths less of the overall cost,” she says.
Got a question for Farnoosh? You can reach her on Twitter @Farnoosh or email her at farnooshfinfit@yahoo.com.