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Tax Preparation: Self or Paid Preparers

Updated on December 17, 2011

It's Tax Time Again

This is the time of year that we get to enjoy the hassles of having or doing our own taxes.  Many people will venture with the highly advertised tax software like Turbo Tax, some utilize the free online programs, and others will take their taxes to a tax professional to have their taxes down.  The big question is, which way is the best?

Obviously the answer is going to vary by individual situation, but I would like to give some advise on what you should consider as you're thinking about having your taxes down.

Tax Software

There are several products on the market now like Tax Cut, H&R Block, and Turbo Tax.  These programs claim to make tax preparation easy enough that anyone can prepare their own taxes. 

While I have not demonstrated all the software programs, I have tried one of them.  I found it easy to use and pretty efficient.  However, having said that let me also say that I am a Certified Tax Preparer.  I have prepared taxes for many years.

While I think that many could utilize these programs successfully you should have a basic understanding of taxes and terminologies.  Realize that the tax code is horrendously complicated and to simplify it with a step-by-step software program will have it's limitations.

The biggest problems I would see in using these programs is that there may be areas of deductions and credits that you may qualify for that you don't know about.  Many times you can be asked a question, but if you don't understand the terminology you are not going to answer correctly.

If you want to be a self preparing at least take the time to go through a tax course offered by H&R Block, Liberty Tax, or your local Junior College.  The basic understanding will go a long way in helping you take advantage of what's available to you and avoid making some basic mistakes.

Institutional Preparers

There are several large tax preparation services around the country. This include, but are not limited to H&R Block, Liberty Tax, and Hewitt Jackson. In there are some positives and some negatives to these types of tax preparers.

The Positives:

It is typically easy to get an appointment with these types of places. In fact, most of the time you can just walk in and with a minimal wait have your taxes done while you are there.

These types of places offer a variety of services such as Refund Anticipation Loan if you need your money fast, and some will even give you a guarantee on their work. That's really nice if a mistake is made.

The Negatives:

In my personal opinion they are very expensive for the level of expertise you get. Some of these will charge nearly as much as a CPA for a basic return. They will typically file your return on a 1040 form no matter which form you qualify to file on. Who wants to know they just paid $185.00 to file a 1040 EZ?

Many of these institutional preparers have tax schools that they offer in the fall. What you don't know is that the person who is sitting in front of you is someone with absolutely no experience. While everyone needs the opportunity to build a career and most of these places have a double check procedure, why would you pay top dollar for entry level work?

The argument for their ability to provide adequate work is that a more qualified preparer will be checking what they do. My problem with this is that it is during the interview where a preparer learns of possible deductions and situations that might positively affect the final line of the return. The more qualified preparer does not have the privileged of being part of the interview. They will only be looking at the information gathered. Therefore, if the new preparer missed vital information in the interview that information will go unnoticed.

Another problem I have is that these business are typically franchises. I personally know of one of these offices where the owner of the franchise doesn't even know how to prepare a return. Contrast this with a local CPA who has a license he/she wants to protect. Even if they have junior preparers working for them they have a vested interest in you and want to see that you pay as little taxes as possible. Most of the preparers in these institutional places are making minimum wage plus a commission per return. It is in their financial interest to get through as many as possible and let the people on the processing side take care of the details.

The other thing that I don't like about these type of places is that the hired help is seasonal and every year they have new employees.  Personally, I don't want to give my personal and financial information to just anyone.  I want to build a relationship with someone who I can trust.

CPA's, Tax Attorneys, and Enrolled Agents

These preparers will obviously be the most qualified from an educational standpoint.  Many have individual businesses where they are interested in keeping you as a long term client.  However, it is also with these that you will typically pay the highest fees.

In my opinion, utilizing CPA's, Tax Attorneys, or EA's is not really worth the cost unless you have complicated tax returns.  A tax return is not complicated just because you make a lot of money.  If you are a W-2 employee you probably don't have a complicated tax return.  Even if you have your own business and have to file a Schedule C, this would not be what I deem a complicated return.  When you start getting into inventories, depreciation, and businesses that have multi-layered structures.  If you truly have a complicated return then seek out and pay for this top end help.

Joe's Tax Service

There are several tax preparation companies that are just an individual who has a tax business. They are not EA's, CPA's or Tax Attorneys they are just individuals who have been preparing taxes for years.  They are licensed and insured and usually value you as a client.

For the average family that receives W-2, itemizes their deductions, and maybe have a small business these can be a good alternative.  You can get as much experience as a CPA, but don't have to pay for the license.  The key here is to find a "good" preparer.  This might be the hard part especially if you don't know anything about taxes. 

Some of the positives about these types of preparers is that you can typically get the preparer on the phone and talk to them and you deal with the same person every year.  Building a relationship is valuable.


Many times people don't want to change tax preparers because "they have always done them and have all my information."  If you don't like the service you are getting don't hesitate to change preparers. 

Taxes, for the person who knows how to prepare them, can very easily prepare your taxes if you have carry over information from prior years.  Don't think that you are stuck because someone has prepared your returns for a long period of time.

Try to avoid the Refund Anticipation Loans.  These are very expensive and definitely not worth the money.  If you have a checking or savings and have your refund direct deposited into your account you can have your money within about 10 days.  Keep your hard earned cash you'll survive the extra few days.


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