On the Fun Scale, tax preparation ranks down there with wart removal. And like warts, taxes returns can come back to haunt you.
The best way to prevent problems from cropping up later is to pick the right tax pro-or get the right tools if you decide to do it yourself. If you have few itemized deductions, don't work for yourself, and don't have other complicated money issues, do-it-yourself tax prep is relatively easy. (See "Doing It Yourself? Get Some Help," next page) But if you're like the 60 percent of Americans who have their returns done for them, here's what you need to know to get the most value for your tax-prep dollar.
Pick the right pro
Tax preparers have varying levels of expertise and charge accordingly. What you'll pay might also differ by the size of the firm. For example, according to a recent survey by the National Society of Accountants, solo tax preparers charged an average of $217 for the usual itemized federal form 1040 and state income tax form last tax season, compared with $245 for preparers at larger firms with three or more full-time staffers. These are your basic tax-prep choices:
• Certified public accountants. Not all CPAs specialize in doing individual income tax returns, so ask up front. To find a CPA, ask friends and neighbors or go to www.aicpa.org. Under "Consumer Information" click on "Find a CPA."
• Enrolled agents. Unlike CPAs, who can handle a variety of financial activities, EAs focus solely on taxes. They must have worked for the IRS for at least five years or passed exams on tax codes and calculations. Enrolled agents might work for themselves or in a CPA firm or storefront office. To locate one, go to the Web site of the National Association of Enrolled Agents.
• National tax-prep chains. Storefront operations like H&R Block, Jackson-Hewitt, and Liberty Tax Service can be adequate for simple, straightforward returns and they're relatively inexpensive. In 2009, the average fee per client at Liberty Tax Service was about $150; at H&R Block, it was $187. The not-for-profit National Consumer Law Center says national chains are less likely than independent storefront tax preparers to hit you with "junk" fees, such as application and document-prep charges. Preparers in franchise offices of the national chains have usually passed at least a several-week course, and the companies maintain that newcomers' work is reviewed by experienced supervisors.
• Free tax prep. If your household income was low to moderate for your community or you're 60 or older, you might not have to pay anything for tax help. The AARP's Tax-Aide service will pair you with trained volunteers who can handle Form 1040 and schedules A and B. For locations and dates of Tax-Aide events, go to www.aarp.org/money/taxaide.