Although they may be tougher to tell apart than the butcher, the baker and the candlestick maker, the characters who clutter the tax-preparation stage have their differences.
To obtain the best and most cost-effective results, taxpayers should look for a preparer who can handle the complexity of their returns.
Although a low-cost tax-preparation service may fit the needs of a person with a simple return that requires only five or 10 pieces of information, someone facing a particularly cumbersome return littered with special circumstances might be better served by a tax lawyer.
Whichever tax-preparation method a taxpayer opts for, the Internal Revenue Service wants to make one thing perfectly clear: The taxpayer, not the preparer, is ultimately responsible for the return.
"Everybody should at least take a look at their own return," said IRS spokesman Bob Firman. "Even if you have a professional preparer, the individual is still responsible for what's on the return, so you should at least know what's on there in case you have any questions."
One of the most popular venues for filing is Kansas City, Mo.-based H&R Block, the giant of the preparation world. Founded in 1955, H&R Block operates more than 8,000 offices worldwide and prepared almost 12 percent of the 105 million income tax returns filed last year, said Jeanie Lauer, director of marketing.
Charging an average of $51 for each return it prepared, and $25 to $35 for each of the 5 million returns it has electronically transmitted to the IRS, Block pocketed about $744 million in fees last year.
"We emphasize peace of mind and convenience," said Ms. Lauer. In addition to Block, there are independent storefront tax-preparation services, some of which operate only during the busy filing season and close up shop after April 15.
"It's a very difficult area for the IRS," said IRS spokesman John Schnellmann. "There are tax preparers who are certainly good at what they do who only operate during the filing season. They may not be aware of the most recent tax law changes if they're not in business all year."
A slightly more expensive and relatively unknown alternative to the tax-preparation service is the enrolled agent.
Enrolled agents, who are certified by the Treasury Department, must have at least five years of experience with the IRS or pass a rigorous two-day test. Only 19 percent of those who take the test pass it, said Mr. Firman, a test administrator.
"If you pass that test, then they check your background, your tax returns, your ethics," said Anita Manuel, president of the Palm Beach chapter of the Florida Society of Enrolled Agents, which has about 70 members. "They cover everything from A to Z."
The average fee charged by a tax preparer may be less than that the $75 an hour or so charged by an enrolled agent, but that is because the preparer tends to prepare shorter and less time-consuming returns, said Nick Ricucci, a Boca Raton, Fla.-based enrolled agent with Computer Financial.
Block advertises its services as "just taxes." CPAs fall at the opposite end of the spectrum. Because they work year-round on tax planning and business accounts, CPAs are often more familiar with an individual's financial situation and are able to put taxes into a larger financial perspective.
"A CPA tends to be familiar with the client," said Michael Barkes, a Boca Raton CPA who has prepared taxes for the past 12 years. "Clients deal with the same person every year. If they go to a large tax-preparation service they're likely to have a different person every year."
Although a tax-preparation service would be adequate for basic returns, Mr. Barkes said, taxpayers who have income from rental property, passive activity investments and sole proprietorships are better off with a CPA.
As with tax-preparation services, CPAs differ widely in cost and scope. Smaller firms, which charge $50 to $125 an hour, are more likely to focus on tax preparation. National firms such as Coopers & Lybrand, Deloitte & Touche and Price Waterhouse, whose hourly fees can run into the hundreds of dollars for TC senior manager or partner, are more likely to emphasize audit services.
Tax attorneys are at the high end of the tax-preparation scale. Their hourly fees can cost a client hundreds or even thousands of dollars.
"Most people would probably want to go to a CPA or a tax-preparation service, depending on the complexity and the amount involved," said Thomas Siciliano a tax attorney with Siciliano & Kramer PA in Boca Raton. "Generally speaking, tax lawyers get involved when [the return] is part of another transaction or in particularly complicated circumstances."