How to Pick a Tax Professional (2024)

Most Americans think of taxes, begrudgingly, for a few weeks in the spring when it’s time to file their annual return. For tax professionals, however, the work happens year-round.

Hiring a tax pro—such as a certified public accountant or enrolled agent—can help you stay organized, avoid expensive mistakes and file on time.

“It can be helpful to tap somebody who does this all day long,” says Michelle Fait, a financial planner and enrolled agent based in Seattle.

They can also flag opportunities to legally lower your tax bill, such as putting money into a retirement account or deferring business income to avoid jumping into the next tax bracket.

“That person is there to make sure you’re not missing anything and that you have optimized everything,” says Caitlynn Eldridge, a CPA in Omaha, Neb.

Read on to find out whether you need a tax professional, which credentials to look for and how to find someone who’s a great fit.

Who should hire a tax professional?

Not everyone needs—or can afford—to hire a tax professional. Here’s a ground rule: The more tax forms you have, the greater the potential benefit of working with a tax pro.

“The more forms you’re getting, it suggests a greater complexity,” Eldridge says. So if you’re an employee with W-2 income and a minimal amount of interest or dividend income, you can likely prepare your tax return yourself using tax software. Plus, if you make less than $79,000 and take the standard deduction, there is a good chance you can prepare and file your return for free.)

However, if your financial or life situation changes meaningfully or you have to report several sources of income, experts say hiring a skilled tax professional is often a must. Think: freelancers, business owners or partners, real-estate investors and employees with stock options. And, while less common, people who have foreign bank accounts or earn income from a trust fund.

“This isn’t where we want to take the advice of the accountant on TikTok,” says Eldridge. The more complex your financial situation is, the more room there is for error when preparing your tax return.

Do you need tax preparation or tax planning?

Tax planning is complementary to tax preparation and can be especially valuable to self-employed people, business owners, retirees and high-net-worth families looking to stay on top of tax deadlines and minimize their tax burden.

Reviewing last year’s income and spending happens when you prepare your tax return. And it’s a great opportunity to identify tax-savvy moves you can make in the future. “Tax planning is more where you start to look forward,” says Fait.

In some cases tax planning and preparation are a package deal. Just 35% of tax preparers charge extra for planning services, according to the National Association of Tax Professionals, a nonprofit professional network with more than 23,000 members.

Types of tax professionals

The duties of tax professionals run the gamut. Those with a preparer tax identification number (PTIN) from the Internal Revenue Service are authorized to help taxpayers file their federal and state returns. Many tax preparers have additional credentials or certificates that signify a specialization in tax law or tax advising.

Here are the various types of tax pros:

Certified Public Accountant

CPAs have met rigorous education, exam and experience requirements across several accounting disciplines. There are more than 672,000 actively licensed CPAs in the U.S., but not all of them focus on individual or business tax preparation—some are auditors, financial consultants or bookkeepers.

“If you’re really looking for a tax preparer who’s a true specialist, you’re looking for a CPA who is specialized in tax,” Eldridge says.

Some CPAs churn out tax returns practically all year long—from the start of tax season in January to the deadline for tax return extensions in October. Others focus on tax planning, for instance helping clients navigate the tax implications of contributing to a retirement plan or exercising employee-stock options.

“Finding out what services the CPA offers is important,” says Sallie Mullins Thompson, a CPA and financial planner who does business in Washington, D.C., and New York City.

Enrolled agent

Enrolled agents, or EAs, are experts in IRS rules and regulations. They have either passed a comprehensive three-part exam covering individual and business tax returns or have previously worked as an IRS employee. They also complete 72 hours of continuing education every three years, including lessons on ethics.

The main duty of an EA is to represent taxpayers during an IRS audit or noncompliance issue. They have “unlimited representation rights,” which CPAs also have, meaning they can represent any taxpayer on any tax matter.

“Enrolled agents are great for tax preparation and are great for dealing with the IRS when you have a problem—not so much law, but they understand what the processes are,” says Thompson. Unlike CPAs, it isn’t common for EAs to offer comprehensive tax planning services, she adds.

Licensed tax preparer

A licensed tax preparer has a PTIN issued by the IRS allowing them to prepare and sign federal tax returns in exchange for a fee. They generally hold no other credentials. The current cost to obtain a PTIN is $19.75 and the application takes about 15 minutes to complete online.

Non-credentialed tax preparers who want to enhance their tax knowledge can participate in the IRS’ Annual Filing Season Program, which requires 15 hours of continuing education courses each year.

Tax attorney

A tax attorney is licensed by their state board and proficient in state and/or federal tax law. Few tax attorneys prepare annual returns or offer tax planning sessions. They primarily work with taxpayers to resolve tax disputes, interpret tax code and advise on decisions that have significant tax implications, such as the sale or purchase of a business. They can also represent taxpayers in IRS-related matters.

CPA vs accountant: Which do you need?

A CPA is an accountant who has earned a credential above and beyond a bachelor’s or master’s degree in accounting. CPAs have to answer to their state board of accountancy, while an accountant with no other professional credentials doesn’t have the same level of oversight.

Unless an accountant has an IRS-issued preparer tax identification number, they can’t legally prepare and file another person’s tax return.

How much does tax preparation cost?

Tax preparers with no professional credentials charge less, on average, for tax prep than credentialed tax pros, such as CPAs or EAs, according to an annual study conducted by the National Association of Tax Professionals.

If all you need is help filing a basic return (Form 1040), here’s the average fee by type of professional:

Tax preparer (no professional designation): $124
Tax preparer (Annual Filing Season Program member): $138
EA: $177
Tax attorney: $182
CFP: $188
CPA: $210

If your situation is more complex and you’re filling out numerous forms to report more than W-2 income (Schedule C for business income or losses, Schedule A for itemized deductions or Schedule E for rental real estate income and losses, for example), you’ll pay more.

The most common fee structure for preparing individual tax returns, used by half of U.S. tax preparers, is a minimum fee plus an additional cost based on the complexity of the return. Another 35% of tax preparers charge a set fee for each tax form and schedule (this is similar to how online tax software is priced). Fewer than 15% charge an hourly fee or use another method.

Here’s what tax preparers charge, on average, by fee method:

Minimum fee, plus complexity fee: $345 (new client), $332 (returning client)
Set fee per form and schedule: $162 (Form 1040 and Schedules 1-3), plus $20 to $104 per form or schedule
Hourly fee: $179

In general, you’ll pay more if you need a business return prepared than an individual return, regardless of the type of professional you hire. In 2023, the overall average fee charged by tax preparers for a business return was $604, compared with $248 for individual returns. Nearly 60% of tax preparers don’t charge extra for a state return.

Is a tax pro worth the costs?

Average tax pro fees are comparable to the advertised prices of leading tax software, but tax software may not provide the type of personalized help some people need.

You can, however, save money if you do your taxes on your own. TurboTax, for example, quotes its DIY package, including discounts, at a starting fee of $89, plus a $39 fee per state return. The company’s Live Assisted package starts at $169, plus $49 per state return, and puts you in touch with a tax pro who can answer questions and review your return before you submit it.

TurboTax also offers a “full service” package where a tax pro prepares your return. For a tax filer with W-2 income, rental property income and a home, the quoted fee starts at $289, plus a $49 per state fee (that includes an early season discount; typically it would be about $400 for federal and state). The average tax preparer with a per-form fee structure charges $282 (often state fees are included).

People with complex financial situations—especially business owners—should think of hiring a tax professional as an investment, Thompson says. “The return on investment will be that they’ll have a clean tax return” and peace of mind, she says.

Not only will a tax pro make sure you’re reporting and paying what you owe, they can also flag tax-saving strategies. EAs and CPAs are required to stay current on the intricacies of the tax code, from 401(k) contribution limits to tax credit eligibility.

How to find tax help

It’s best to start your search for a tax preparer at least six months before tax day. “January through April is a really bad time to try to have that conversation with someone,” Eldridge says.

If you still need help, consider requesting an extension to push your filing deadline to October. You can reach out to tax pros now and ask if they have availability in June or July to work on your return.

If you need to file a state tax return too, be sure to look for a tax pro with experience preparing returns in your state. Unless you prefer handing over your documents to a tax pro in person versus via online portal or email, consider widening your search and working virtually with an out-of-state tax pro.

The most important thing is finding someone who you trust and feel comfortable with. “I really encourage anyone who’s looking to find someone who wants to teach, because the tax code is complicated,” says Eldridge. “While you as an individual probably don’t want to understand the nuances of the tax law, you are still signing your tax return.”

For tax pro referrals, ask friends, family, social media groups and local businesses, Eldridge says. “Anyone who’s similar to you in their money habits is a good place to start,” she says.

Here’s a starting list of questions to ask as you vet tax pros:

What are your credentials?
What services do you provide?
What’s your core business (tax prep, tax planning, etc.)?
How long have you been doing this?
What is your fee structure and rate?
Do your fees increase annually?
What’s your preferred method of communication?

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Meet the contributor

Tanza Loudenback

Tanza Loudenback is a contributor to Buy Side from WSJ.