Beware of the Tax Professionals

Typical CPA is cheaper than the big advertising tax firms.

Here’s the deal. The ads you see on the TV for tax preparation are by only a couple of firms. What they do is, beginning in about October of each year, offer training courses of about 40 hours in length, at the end of which, they offer jobs for the upcoming tax season. Then they advertise like crazy and locate in Wal Marts and Sears stores and malls, offering “discount” tax services and the infamous instant refund.

I am a CPA and while I do not do taxes, one of my partners does.

A few comments:

Every time he gets a client whose previous return was done by one of the mills described in the first paragraph, he will go over the previous return with the client and almost without exception, will find errors or omissions in the return which caused the client to have paid more taxes than they should have. Usually several hundred or thousands of dollars. He will amend the return for a couple of hundred bucks and the client gets the refund.

This is the big thing: he can usually do the return quicker, cheaper, and more correctly than the firms with ads all over the place. And, if you do get an audit, he is more than capable of representing you with the IRS and has an excellent chance of prevailing against them.

So why do people choose the bug firms with all the ads? They think the CPA’s are too expensive. I have never quite understood this, because most people decide this without picking up the phone and talking to a CPA. If they did, they would find that for the typical return, a CPA may be cheaper and, without a doubt, more qualified.

Instant refunds: DO NOT DO THEM. The effective interest rate is out of this world. I have a friend who offers them and he makes more on the fee charged for the refund than he does on the return itself.

Last item: the so-called AUDIT INSURANCE? Do not buy it. The odds of the average taxpayer being audited are infinitesimal and the people who sell that insurance most often never have to perform any services because the people who buy it simply do not get audited all that much. Again, pure profit to the preparer.

How to find a good CPA? Yellow pages, friends, or call your state society of CPA’s; one of their reasons for existence is to help the public contact the right CPA.