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Tax Prep & Filing

Five Steps to Hiring a Tax Pro

Need professional help with your return? Here's how to find the right person for the job.

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Has your tax return gotten just too complicated to handle on your own? Or maybe you just don't have the time to fill out all those forms. So now you've decided to bite the bullet and hire a tax pro.

SEE ALSO: IRS Audit Red Flags: The Dirty Dozen

If your tax situation is relatively simple, you probably can get by with a commercial preparer such as H&R Block or Jackson Hewitt. However, if your tax return will be complex, consider an enrolled agent -- a tax professional who is licensed by the IRS. Enrolled agents must pass a stringent three-part exam and complete 72 hours of IRS-approved continuing education every three years, says Gigi Jarvis, senior director of communications and marketing for the National Association of Enrolled Agents. Enrolled agents are authorized to represent clients before the IRS in the event of an audit.

A certified public accountant (CPA) is licensed by state boards of accountancy and must pass the Uniform CPA Examination. CPAs provide tax planning and preparation but also offer a range of other services. So this might be the professional to consider if you have a business or need year-round tax help. Another option is an accredited tax adviser or preparer, who receives credentials from the Accreditation Council for Accountancy and Taxation and must complete 90 hours of continuing education every three years. Both are qualified to handle returns for individuals and businesses, but tax advisers often handle more complicated issues such as estate planning.

Those are the various professionals who can help. Picking the appropriate type of preparer is the easy part. Actually finding the right person to do the job can be tough.

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If you're thinking about enlisting the help of a professional tax preparer for the first time or are searching for someone new because you're not satisfied with the service you're getting from you current preparer, follow these five steps.

Step 1: Get a referral. Ask your friends, family and colleagues whether they can recommend a tax preparer. If you are new to an area, check with your state's CPA society, which should be able to help you find a CPA in your area, the Accreditation Council's Web site for an accredited tax adviser or preparer, or the National Association of Enrolled Agents' Find an Enrolled Agent tool.

Then narrow your list of recommended tax preparers down to two or three candidates, who you will then call or visit for an interview.

Step 2: Interview candidates. If you're trying to hire a new tax preparer in the midst of tax season, you might have a hard time finding someone who can sit down with you in his or her office for a long interview, warns Michael Eisenberg, CPA/PFS and founder of Eisenberg Financial Advisors in Los Angeles. However, most tax preparers should have time for a phone interview of 20 to 30 minutes. If they aren't willing to give you a few minutes on the phone -- or want to charge you for the initial interview -- then look elsewhere. "You want somebody who is willing to listen to you, hear what you're saying and answer your questions in plain English," Eisenberg says.

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And here are some key questions to ask:

How long have you been in practice? You want someone who has been preparing returns long enough (i.e. several years) to anticipate problems or IRS challenges.

What are your credentials? Anyone can hang out a sign claiming to be a tax preparer because there are no licensing requirements. So look for an enrolled agent, accredited tax adviser (ATA), accredited tax preparer (ATP), certified public accountant (CPA) or CPA/PFS. Only a CPA can have the PFS, personal financial specialist, designation. Check your state's licensing board and professional associations (see step 1) to assure that he or she is licensed, is a member in good standing and has had no disciplinary action taken against him or her.

Do you have any specialties? This is important to ask if you have a specific need. For example, if you have a small business, you need someone who knows business accounting. Or if you have rental property, look for someone who has experience handling this sort of tax situation.

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How much will you charge? Eisenberg says you probably won't get an exact number, but a tax preparer should be able to provide you with an estimate. Find out if he or she charges an hourly rate or flat fee and whether that fee will cover everything or will there be add-ons for planning meetings and calls throughout the year.

Do you have room for a new client? Or, more importantly, will you file my return in a timely manner? And will you have time to meet with me throughout the year?

Will you handle my return, or will you hand it off to a less-experienced associate? If the preparer is part of a firm and will not be preparing your return personally, ask if he or she will review it after the associate completes it.

Will you represent me before the IRS? "Run out the door if the answer is no," Eisenberg says. If you are audited, you want someone who will defend your return.

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Step 3: Watch for red flags. Steer clear of anyone who talks about cheating the IRS. Or a preparer who pushes you to take deductions, says you don't have to report certain income or promises to get a refund that will be a certain percentage of what you earn. Eisenberg also says you should avoid someone whose fees are based on a percentage of your refund. "If the preparer's fees are contingent on what you're getting back, he or she may bend the rules to get more back," he says.

Step 4: Mention any special circumstances. Let the preparer know about any events, such as a recent divorce or large lump-sum payment from a retirement plan, that will affect your tax situation.

Step 5: Pick a preparer. So maybe even after you've interviewed all your candidates, you're still not sure whom you want to hire or are nervous about handing over this important duty to someone else. After all, it's your signature on the form, and you're liable for the information on it -- regardless of who prepares it. "You need to bite the bullet and say, 'These people are professionals. They'll probably do a better job than [I will] because they know the law,'" Eisenberg says. Besides, you have to make a decision or your tax return won't get filed, he says. Just be sure to select an individual who will be available if you have questions months, or even years, after your tax return has been filed.

You've made your choice. Now what?

"Don't bring in a mess," Eisenberg says. If you take a shoebox of receipts and documents to the preparer, you'll be wasting his time and your money.

Compile summarizations of your income, expenses, cost basis of investments you sold, Social Security numbers for all dependents, a list of donations you made (and documentation if necessary). Plus, take all the tax-related documents you have received in the mail and tax forms sent to you by the IRS. "Make it as simple and clear cut for the preparer as you can," Eisenberg says.

Do not sign a blank return. "It's like giving a blank check to someone," Eisenberg says. Be sure you are satisfied with the return before signing it because you are responsible for its contents.

When the return is complete, make sure the preparer has signed it. "If they don't sign it, it should raise a red flag: Are they doing something they know is wrong?" Eisenberg says. Besides, paid preparers are required by IRS to sign a return.

Pros on the cheap

If you can't afford one of the tax preparers discussed above, you still can get some help from a professional -- for free.

Your first stop should be the IRS's Web site. There you'll be able to search for local services, including free help lines and walk-in centers. You can also try the IRS's national hotline, 800-829-1040, although you're more likely to be greeted with a busy signal than a helpful voice -- and phone lines will only get busier as tax day approaches.

Another source of free person-to-person tax help is the AARP's Tax-Aide program. IRS-trained volunteers complete your taxes for you. The service is available to middle- and lower-income taxpayers of all ages, and operates from local community centers between February 1 and April 15.