Tax Pros: Are They a Waste of Money?

Photo (cc) by AR McLin

April 15th is taxing enough without blowing big bucks on paid preparers that are either overkill or over-priced. If you’re going for the human touch, here’s how to pick the right pro.

As long as you file your taxes on time and accurately, the IRS doesn’t care if you do it with a dull pencil or with the assistance of a $500/hour tax attorney. But if you’re going to pay a pro, don’t overpay. In fact, for many people, there’s no reason to pay at all.

Check out this recent news story I did on free tax help. The bottom line of that story is that if you made $49,000 or less last year, it will cost you zip to sit across the desk from a live, human tax preparer (albeit a volunteer.) And even if you made more than that, if you’re willing to do varying degrees of the work yourself, you can still file free.

If that doesn’t do it for you, two other options are to buy software and install it on your computer, or use an online-only software preparation service. Of these two options, online generally offers more choices and lower prices. There’s a ton of online companies to pick from: one way to check out a bunch in one place is at the IRS freefile website: that’s the website set up for those who qualify for free filing, but it links to a lot of online companies that will also accept money.

For the vast majority of people, software is the perfect solution for taxes. Because while income taxes may seem exceedingly detailed and complicated to you, doing math and remembering a few thousand rules and variables is exactly what computers were invented to do.

Still insist on the human touch over software? You’re certainly not alone. According to this survey commissioned by H&R block and performed by Ipsos, more than half of Americans plan to use some form of human help to get their taxes done this year. Check out this 90-second news story I just did on picking the right one. Then meet me on the other side for more.

Now let’s recap the tips from that TV news story and add some more:

The way your hire a tax preparer is the same way you’d hire any human help from a contractor to a lawyer to a mechanic to a doctor.

  • Ask your friends or co-workers for referrals: but try to determine that their situation somewhat similar to yours.
  • Check out credentials. In order of most-educated when it comes to taxes, there’s tax attorney, then CPA, then enrolled agent. There are also other designations, and none: professional credentials aren’t required to charge for tax preparation.
  • Ask about experience. A license and education are nice, but experience is crucial. Especially experience in dealing with people in situations similar to yours. The more, the better.
  • Ask for referrals. Any professional in any field should be happy to provide them. Of course, only an idiotic professional would provide you with a customer that’s going to bad-mouth them, however, so you can’t put too much weight on this one.
  • Talk to several before you decide: easily the single most important thing before hiring virtually anyone. Only after talking to several people will the positive attributes you’re seeking surface in one of them.
  • Ask about continuing education: take it from someone who’s skated through correspondence courses simply to keep a license active: this isn’t a guarantee that they’re up to speed. But it’s better than nothing.
  • Ask about professional organizations they belong to: again, not the be-all and end-all, but might be an indication they at least take an interest in their profession.
  • Make sure they’re around all year. You could need help with an audit in August.
  • Compare prices. If one pro charges more than another, what are they going to do for you to justify the premium price?

And keep this in mind: when you decide against do-it-yourself software and enlist the personal service of a pro, you may not be accomplishing much other than creating a bigger bill. That’s because virtually every human tax preparer is also using software to prepare your return. You’re giving them your information, and they’re doing the same thing you could be doing: inputting it into a software program that spits out a completed return. In other words, in many cases when you’re sitting across the desk from a tax professional, what you’re really doing is paying someone from $50 to $500 an hour to do your typing for you.

So why go to a human preparer? There’s only one reason: sometimes human beings can do things that software can’t. For example, by asking the right questions they can ferret out deductions that software might have missed. Or by getting to know your situation, they might help you formulate a strategy to minimize future taxes, or answer other financial questions you might have. While most modern software does ask you questions, provide answers and try to help with strategy, it will never be a match for an expert human brain.

So don’t be penny-wise and pound foolish: if a pro can really help you, buck up. But if you don’t need or don’t receive valuable personal advice, don’t pay for it. Use software and do your own typing.

When it comes to tax preparation, I think way more people pay for personal service than should. Picking a pro over software is like picking the Hyatt over the Holiday Inn: if you’re not going to enjoy the frills, you’re wasting your money.

Bottom line? If you’re going to pay a pro, ask as many questions as you can about strategies to minimize your taxes and get enough sensible, specific, actionable advice to offset the additional cost.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Read Next
5 Ways Your Phone Can Slash Grocery Costs
5 Ways Your Phone Can Slash Grocery Costs

These free apps and websites can help you get cash back on groceries, shop more efficiently or squeeze the most from the ingredients you have on hand.

2 Costly Rewards Credit Card Mistakes — and How to Fix Them
2 Costly Rewards Credit Card Mistakes — and How to Fix Them

If you commit either of these credit card sins, you are likely losing money every time you use a card. Here’s how to easily right this wrong.

10 Common Expenses That Have Skyrocketed for Seniors
10 Common Expenses That Have Skyrocketed for Seniors

Retirees must stretch their dollars further and further these days — no thanks to these costs.

Big-Ticket Things You Should Never Buy
Big-Ticket Things You Should Never Buy

In this week’s podcast: Are you wasting big money on these common purchases?

These 12 Reusable Products Save You Money Over and Over
These 12 Reusable Products Save You Money Over and Over

Buy reusable versions of these household items, and you won’t have to spend another dime on them for years.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
11 Senior Discounts for Anyone Age 55 or Older
11 Senior Discounts for Anyone Age 55 or Older

There is no need to wait until you’re 65 to take advantage of so-called “senior” discounts.

20 Things That Are Actually Worth Stockpiling
20 Things That Are Actually Worth Stockpiling

You don’t need a year’s supply of toilet paper to survive an outbreak, but consider stocking up on these items.

Can a Twice-Divorced Woman Claim Social Security Survivors Benefits?
Can a Twice-Divorced Woman Claim Social Security Survivors Benefits?

Understanding survivors benefits rules is the key to getting the most from your benefit.

9 Things You’ll Never See at Costco Again
9 Things You’ll Never See at Costco Again

The warehouse store offers an enormous selection, but these products aren’t coming back.

These Are the 10 Worst Cars for Depreciation
These Are the 10 Worst Cars for Depreciation

Two types of vehicles are especially likely to see steep plunges in value.

Seniors With COVID-19 May Display This Unusual Symptom
Seniors With COVID-19 May Display This Unusual Symptom

Largely asymptomatic seniors may experience a symptom not commonly associated with the coronavirus.

Never Buy These 10 Things With Your Credit Card
Never Buy These 10 Things With Your Credit Card

Credit cards offer many conveniences and protections, but sometimes it’s simply smarter to keep the plastic tucked away.

13 Amazon Purchases That We Are Loving Right Now
13 Amazon Purchases That We Are Loving Right Now

These practical products make everyday life a little easier.

18 Early Black Friday Deals on Amazon Today
18 Early Black Friday Deals on Amazon Today

These items are all steeply discounted — but the deals won’t last long.

10 Things I Always Buy at Trader Joe’s
10 Things I Always Buy at Trader Joe’s

From snacks to sweets to side dishes, stock your cart with these time-tested favorites on your next TJ’s run.

19 High-Paying Jobs You Can Get With a 2-Year Degree
19 High-Paying Jobs You Can Get With a 2-Year Degree

There are easy high-paying majors available in the U.S. — and no bachelor’s degree is required. We’re here to help you find easy degrees that pay well.

8 Surprising Household Items You Can Sell for Fast Cash
8 Surprising Household Items You Can Sell for Fast Cash

Sometimes, the humblest household items are worth the most money.

Cut These 11 Expenses Now If You Hope to Retire Early
Cut These 11 Expenses Now If You Hope to Retire Early

Like the idea of financial independence? Part of the FIRE equation is cutting costs.

5 Ways Social Security Will Change in 2021
5 Ways Social Security Will Change in 2021

These adjustments will affect both workers and retirees in the new year.

Stop Buying These 19 Things Online
Stop Buying These 19 Things Online

The internet has changed how we shop. But for some things, you’re still better off buying the old-fashioned way.

15 Products You Need — Even If You Didn’t Know It
15 Products You Need — Even If You Didn’t Know It

Discover some must-have products on Amazon that you didn’t even know you were missing.

3 Ways to Get Microsoft Office for Free
3 Ways to Get Microsoft Office for Free

With a little ingenuity, you can cut Office costs to zero.

7 Tips for Building an Emergency Food Supply
7 Tips for Building an Emergency Food Supply

A pandemic or natural disaster could leave you reliant on your existing emergency food supply. Is your pantry well-prepared for emergencies? Knowing what to stock up on for emergencies can be a difficult task and we’re here to help.

These Are the 4 Best Medicare Advantage Plans for 2020
These Are the 4 Best Medicare Advantage Plans for 2020

Medicare Advantage customers themselves rate these plans highest.

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.