Should I Use a Certified Public Accountant or a Tax Preparation Firm?

We’ve already talked about how using tax preparation software can lead to all sorts of problems on your tax return, including a potential audit. Even though the software might be helping you along, it does not have an actual brain to advise you on deductions or expenses.

In which case you may be thinking—“You’re right! I need an actual person helping me with my tax return!” And you write down the number of that well-known tax preparation service that has been running ads on television for years. They must be good, right?

Not necessarily. Let’s explain a few things about these tax preparation firms that are commonly seen in television ads around tax time.

We use the analogy of a triangle. Imagine, if you will, walking into one of these tax preparation firms’ offices. You are now at the base of the triangle.  There will be rows upon rows of desks in that office, with employees talking to customers about their taxes.  You will be assigned to one of these tax preparers, but in the back of the room, essentially the top of the triangle, there is one person sitting on high.

You’ll be assigned to one of the tax preparers in the front, who will interview you, review your receipts, paperwork and other information they need for taxes, and then prepare your tax return for you. All of these tax preparers have to funnel the returns they have worked on up to the person at the top of the triangle. This person takes all of five minutes to look at your return for accuracy, signs it and sends it on, because they are looking at literally hundreds each day.

So far, so good, right? Well, let’s look a little closer. The person at the top of the triangle is usually an “enrolled agent”, rarely a certified public accountant. While enrolled agents (or EAs) have been tested by the IRS and can represent any taxpayer in any tax matter, they have not passed the rigorous certification test that certified public accountants have taken—a test that is said to be second only to passing the bar in difficulty. It’s not to say that they aren’t qualified to prepare taxes, but you are likely to get a higher level of service and knowledge from a CPA. CPAs are required to have a BA or BS degree before taking their CPA exam and, like an attorney, is required to pass testing in the state in which they are going to practice. They are held accountable at a state level.

As for the tax preparers at the base of the triangle, they have had about 80 hours worth of instruction before taking a test that they need to only pass with a score of 80% or higher. (Most CPAs study for six full months for their examination.) They get taught the basics, like how to read a W2 form, filing status, tax credits and deductions and exemptions, and then they are given the test. Their results determine whether or not they are given a job. No other formal training is required, not even anything above a high-school degree.

Like with many things in life, you get what you pay for. Is a small refund worth an audit down the line? Are you happy paying for a service where your taxes are being prepared by marginally qualified individuals? Or would you rather spend a little more money and get your taxes completed by a true professional?

But don’t just assume that all CPAs are perfect! Treat hiring a CPA like hiring an employee. Schedule an interview. Check references. Trust your gut feeling—do you feel comfortable with this person?

At Simons Accountancy, every tax return gets personally checked by Ed Simons himself, and he sure takes more than 5 minutes reviewing each return. He takes the time to look over the details and all of the supporting documents before signing off on the return.

Remember, that if you are audited, it’s not the tax preparer’s responsibility to recompense the IRS if the return is wrong; that burden is squarely on the individual’s shoulders. Yes, these companies will have some guarantee on certain types of mistakes and will attempt to fix them, but the individual is responsible to pay any discrepancies on money owed.

Do you have questions about the Simons Accountancy process? Are you ready to schedule an interview with Ed Simons? April 15th is fast approaching, so contact us now for the earliest appointment to review your taxes—call (714) 637-4552 or use our online form.

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