The National Society of Accountants recently posted the results of a survey regarding the cost of tax preparation.

They found the national average for a federal 1040 with itemized deductions and one State return was $246.

Based on that, I can tell that the fees at our firm, Vander Lugt, Mulder, DeVries & Elders, are pretty much in line with the averages.

The average for a partnership tax return was $556; a corporate return $759. Those costs can vary widely depending on the client, but those are around our average as well.

I had to smile this past Tuesday at the bi-weekly Grandville Chamber of Commerce leads group meeting. Some members were appropriately giving some positive testimonials for Joe Van Dyke, a Waddell & Reed financial representative, but a couple of them included a statement similar to “our investments went up x% this past year” implying that Joe did a great job because they had a positive return. Well, as Joe and every honest financial representative knows, if you’re up 3% for the year and 99 other reps are up 10%, you didn’t do a good job just because you’re return was positive. And if you’re up 3% when everyone was down 10%, well, you did a great job even though the gain was “only” 3%!

The point is in some services you just can’t judge the “worth” of the service simply by your own experience. Often times you really have no idea how to judge the service you received because you have nothing to judge it against and that’s certainly true in my line of work. If you have me prepare your taxes and you get a refund of $1,000, is that “good” preparation? What if you went to someone who was very willing to deduct the $23,000 of non-cash donations that one of my clients tried to deduct a few years ago? I said “no way” and we ended up at about a $1,500 deduction. Someone that used the $23,000 value would have gotten that client a refund thousands of dollars higher; does that make them a “better” preparer?

So, if you can’t judge tax preparers by the size of the refund or the amount of tax due, how do you pick someone?  I suggest the following:

1. Are they open year round? A lot of tax preparers close down after tax season is over and if you have any issues you have to find some other office or some home office phone number. We’re here when you need us.
2. Do they talk to you in a way that makes sense? Every profession has its’ “language” that insures that no one understands what they’re talking about, but with a tax professional you must have someone who can talk to you in an understandable manner.
3. How much continuing education do they take each year? CPAs like me have to take 40 hours every year, and typically half of that will be in taxation. Enrolled agents have similar requirements. Make sure your preparer cares enough to stay educated!
4. Do they seem reasonable in what they say and do?  Believe me, following the tax law to the absolute letter is tough; I could make my client’s life miserable (for as long as I had them!) if I demanded they follow every law to the letter. But on the other hand, you’re doing yourself no favors by using a preparer that shows a total disregard for tax law. Do they seem to strike a reasonable balance?
5. Finally, do they seem to have a good knowledge of matters other than taxation? So many clients ask us legal and financial questions before they ask their attorney or investment person. Why? Because we’re objective in those areas and typically know more than our clients do about those issues. Obviously we need to know when to refer a client to an attorney or financial professional, but that objective advice is one of the reasons why people are willing to pay us to prepare their tax return – because in part they’re also buying access to our experience and general advice.