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By LIZ PULLIAM WESTON
Finding The Right Tax Preparer
Dear Liz: Last year I had to find a new accountant to prepare my taxes and was charged a small fortune. (The person who had done our taxes previously refused to do them last year because he was doing my ex-husband's return and thought doing mine would be a conflict of interest.) Before tax season really is upon us, how do I find a good, honest accountant I can trust and who will charge me a fair rate?Answer: What you pay to have your taxes done typically depends on two factors: the complexity of your return and the skill level of your tax pro. Matching the two can help you ensure that what you pay is appropriate.
If your tax situation is relatively straightforward, for instance, you might opt for a storefront or chain tax preparation firm, which is typically the least expensive option.
If your return is a bit trickier or you want ongoing advice throughout the year, an enrolled agent could be a good bet.
Enrolled agents are tax specialists who are certified to represent you with the Internal Revenue Service; their rates are typically higher than storefront chains but lower than those of certified public accountants.
If you own a business, have lots of taxable investments or otherwise have a complex return, then a CPA who specializes in taxes might be a good bet.
You can get referrals from friends and from professional organizations (such as the National Assn. of Enrolled Agents at www.naea.org and the American Institute of CPAs at www.aicpa.org). Some questions you should ask prospective preparers include:
• How much experience do you have with returns like mine? It's impossible to be an expert in every area of tax law. The more complex your situation, the more you want a tax pro who has experience handling similar matters.
• Would you describe yourself as conservative, moderate or aggressive? There are enough gray areas of tax law that your pro may have to make some judgment calls, and you want to make sure his or her philosophy aligns with yours.
• What might my return cost to prepare? You don't want to shop on price alone, because a cheap return that invites an audit will ultimately cost a lot more than one that was done right the first time. But an estimate in writing should help you avoid surprises.
You also can keep costs down by doing your part. Fill out the client organizer most preparers provide, supply all the documentation your tax pro requests and promptly respond to any requests for further information or clarification.
Dear Liz: You recently suggested that people use any extra money to invest in retirement accounts rather than pay down low-rate deductible loans such as mortgages and student loans. The problem with that advice is that most people with student loans have high-enough incomes that they can't take the deduction. Please clarify; it seems a bit misleading to say that most people can deduct their student loan interest.
Answer: Student loan interest is deductible if your modified adjusted gross income is less than $65,000 for singles or $135,000 for those who are married filing jointly. Because more than 80% of taxpayers have adjusted gross incomes of less than $75,000, according to the IRS, and because you don't have to itemize deductions to take advantage of this tax break, it's safe to say that most taxpayers can use the deduction if they pay student loan interest.
Dear Liz: How do I stop credit card companies from sending me card offers?
Answer: You probably can't stop the deluge entirely, but you can cut down on the offers you get by signing up with the credit bureaus' opt-out service at (888) 5-OPT OUT -- (888) 567-8688 – or www.optoutprescreen.com.
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© 2008, No More Red Inc. Liz Pulliam Weston is author of the new book “Easy Money: How to Simplify Your Finances and Get What You Want Out of Life.” She regrets that she cannot respond personally to inquiries, but questions for possible inclusion in her column may be sent to 3940 Laurel Canyon Blvd., #238, Studio City, CA 91604, or use the “Contact Liz” form at her website, www.lizweston.com.
