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Advice comes at a price

Tax season may be behind us, but it's never to early to look ahead to next year: Does the average American need to pay hundreds of dollars for a certified public accountant to prepare his or her taxes? Who actually benefits from this expertise, and who should choose a tax preparer or go the DIY route instead? Here is an outline of the types of tax professionals, who should use them and how much you should expect to pay:

Do it yourself

Who it's good for: Individuals who are not self-employed and who feel comfortable with both the tax laws that apply to them and a name-brand software program to help file. (Smith recommends checking in with a tax professional every other year just to make sure you're on target.)

Pros: The price is right; flexible schedule.

Cons: Can be confusing and time-consuming. There's no one to blame for mistakes but yourself.

Price for TurboTax: Free or $50 for most basic filings, which does not include state returns.

Tax preparers

Who it's good for: Individuals with basic filing needs — EZ forms or standard deductions like home interest and children — who have not faced major life events in the past year.

Pros: These professionals deal only in taxes. Thanks to recent law changes they must be licensed and receive annual training to ensure familiarity with the most recent laws.

Cons: Their advice is limited to taxes, not a holistic view of your personal or business finances.

Price: $160 at H&R Block for W-2 workers with itemized deductions.

Enrolled agent

Who it's good for: Those who have been audited and need an agent to represent them before the IRS.

Pros: These professionals are highly trained and specialize in representing clients in disputes with the IRS. Vetted by the federal government.

Cons: Not the best bet choice if the case is criminal in nature.

Price: Usually the same rate as a tax preparer filing, though the final bill will balloon with the complexity of an audit or dispute.

Certified public accountant

Who it's good for: Business owners, the self-employed and those needing yearlong or complicated financial and tax-planning strategies like estate planning, investment properties and stock options. Also recommended for people facing a life change, such as relocation, marriage, divorce, a new child or a kid heading off to college. "The value of a CPA is the proactive tax-planning and cash-flow ideas they can offer — not just compliance," says Melissa Labant, an expert with the American Institute of Certified Public Accountants.

Pros: Provide a broader, strategic look at your taxes in the context of your overall life or business.

Cons: More expensive.

Price: An average of $229 for tax preparation, according to the National Society of Accountants.

Tax attorney

Who it's good for: Those under criminal IRS investigation or are otherwise afraid of going to the big house because of their tax activity (or inactivity). Those launching a business that needs special tax structure or will operate internationally. Those dealing with a large or complicated estate.

Pros: This is the only way to go if you face criminal charges or complex tax matters related to a business.

Cons: Not always specialists in IRS collections. Pricey.

Price: Hourly rates of $200 to $400 and up, with retainers starting at $2,000, with the sky as the limit.

Advice comes at a price 08/31/11 [Last modified: Wednesday, August 31, 2011 4:30am]
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