Top 10 considerations in selecting a tax professional
July 16, 2004
By Jim Harnsberger, Sr. Tax Analyst

With thousands of tax laws and changes to comply with every year, business owners and individuals need to find an effective way to select a tax professional. Here are 10 considerations:

Knowledge and education
Education is the most important aspect of a successful tax practice. Ask the tax professional how many hours of professional education he or she completes each year -- not education in the form of courses taken via the U.S. mail, but rather real education in practice and procedure.

If the tax professional has not completed a minimum of 80 hours per year in developing skills and expertise, this is not the tax professional for you.

Ongoing client follow-up
The successful tax professional will provide clients with regular, free ongoing appointments to review the many changes that take place in life before the next tax season. In this manner, a tax professional is better able to advise the client in advance of how to make better decisions and avoid the tax surprise that often comes on April 15.

A nominal fee may be involved to actually implement some specific advice, but the consultation should be free. That advice should result in more tax savings than any fee charged.

Depth of client knowledge
How much time the tax professional invests in learning about his or her clients, their personal or business issues and to some degree, the many events that take place every year in their life, is an example of a true professional willing to learn about clients to find more effective ways to serve their needs. This is referred to this as "client profiling and indexing."

The client 'organizer'
Tax professionals who mail out hundreds of year-end organizers are not the ones you want to prepare your tax return. How do you know what is important if the right question has not been asked or explored?

Every year, though, thousands of these organizers are mailed. Clients become frustrated when they fill these organizers out, only to find the information is transferred into a software package to produce a tax return.

Ability to provide specific answers
How many times do we hear that 10 tax firms were asked at tax time to complete a sample return, and the news reporter writes a story that the firms received 10 different results?

Why does this happen? Poor fact finding.

Trying to make one answer fit every client is the old way of doing business. A true professional will ask the specific question, complete the specific research, and provide the client with a specific answer along with all of the alternatives or options under current law.

Most tax professionals fail in their ability to perform effective research let alone draft a client memorandum that guides the client carefully to a result that reduces tax exposure.

Organizational skills
If the tax professional has mounds of files on his floor, and the desk is covered in dozens of papers or, worse yet, they cannot find your file or records, then this is an office you want to avoid.

Organizational skills are the hallmark of a true professional. Neat, orderly client files, with notes and important information available at a glance are the mark of someone who will invest the same talents into ensuring your return is as accurate as possible.

Educating clients about their return
When the return is finally ready, a successful tax professional will take the time to explain every entry and why it appears as it does on the return. The tax professional also will provide the client with some assurance (e.g. Code Section references) that the results are accurate.

Most simply present the return, go to the refund or tax due, bottom line the answer and tell the client how much the bill is. No wonder clients are frustrated.

Amount of detail in the tax return
A true professional will detail every entry in the return so that the Internal Revenue Service has the information necessary to ascertain the accuracy of what is being filed. This process actually reduces the risk of an audit contrary to popular belief, and dispels the myth about the "red flag." There are actually no red flags at the IRS office when you file a return.

Explaining the fees
A true professional will be able to explain every charge in the fees you pay for tax preparation services. If the tax professional details as much information as is necessary on the return and explains every part of the fees to you, you will be more than satisfied at the result of the completed return.

After all, the return is merely the score of how well you did, and more importantly how well the professional did, in helping you control the taxes throughout the year.

Ability to represent the client
Once the return is prepared, neither the client nor the tax professional has much control over the IRS selecting the return for an audit.

There is always a different fee for audit representation in any professional office. The question is, does the professional have the skills necessary to represent you in the audit and defend every entry on the return?

A true professional will know what type of audit is being conducted and what pre-audit procedures to employ. He or she will sit down with the client and develop an audit strategy to reach a conclusion that is in the best interest of the client. The tax professional will also make sure no repetitive examinations will be conducted on any closed audit issues.

Finding the cheapest or the most expensive tax professional is by no means a measure of skill, expertise or ability to advise clients, prepare an accurate tax return and properly advise clients of the various alternatives available to them in planning or reducing their taxes. The cost professionals charge for their services says nothing about their skill or talents.

The difference between having your taxes prepared and having a professional advise you on the various ways in which you can control how much you pay is measured on one thing and one thing only -- education.

For more information contact Tax Smart America at (619) 469-5800.