For the past 10 years, Donald and Dorothy Ruth have turned over the business of preparing their taxes to professionals.
Several Mondays ago, they sat in an H&R Block office, waiting for their names to be called. After an hour, the couple was still waiting to find out how large their refund would be this year. ''We didn't know it was one of the busiest days of the year,'' Mr. Ruth said.
Tax season got busier at many professional preparers' offices earlier this year. Tax preparers said state and federal governments got W-2 forms into the hands of their workers earlier this year, and that helped some to make their choices early to use a professional or to do their tax returns on their own.
Traditionally, there's a long list of reasons that people should consider using a paid preparer, most notably changes in lifestyle or complexity. Lifestyle changes include death, marriage, divorce, a major change in household finances, buying or selling a home, or a move between states. Items that could make your return too complex to handle yourself might include reporting income from a home-based business, operating rental property or dealing with substantial investment income or major theft or fire loss.
Last year's tax law changes on capital gains might have put almost anyone who owns stocks or other types of investments in that category. That's because changes in the law created different time limits that the investments have to be held to qualify for different rates. ''This (tax) act really highlights why you need a professional,'' said Lewis Henderson, chairman of the tax committee of the South Carolina Association of Certified Public Accountants.
Apart from those issues, some turn to paid preparers out of fear, loathing or lack of time.
Changes in tax law - the Roth IRA and tax breaks for people saving for college education or paying education loans - underscore the need for long-term planning for people in the middle class, Mr. Henderson said.
That means wage earners using a professional this year might need to spend more time talking about what they can do to take advantage of the new tax breaks in 1998.
If you are going to use a paid preparer, you'll need to decide who you'll spend your time and money with. It's a good idea to check with friends, family and co-workers for recommendations. Ask about their experiences with the preparers' quality of work, responsiveness to questions and ability to get returns done in a reasonable amount of time.
The next step is understanding who you will use to prepare your tax return: preparers, enrolled agents or CPAs. In a service that can have major consequences for the unwary, it's important that consumers know who they are paying to do their taxes.
A preparer need not have formal credentials or training to do the job; however, most attend at least annual training courses on tax law changes.
Enrolled agents are preparers who have passed a series of IRS examinations and sometimes are former IRS employees.
CPAs and tax lawyers are regarded as the most skilled tax pros. But not every CPA knows the intricacies of IRS rules regarding individual tax filers.
Who should you use? People with a basic W-2 and maybe mortgage interest deduction should consider using a regular preparer, Mr. Henderson said. People with more complex situations - such as business income, investment gains and losses - and the need to make long-term plans might want to use a CPA, he said.
It's also important to know how the preparer is being paid.
Some preparers are paid by the form and some by the hour. Some preparers might charge as little as $10 for some forms, such as the Schedule B to report interest and dividend income and $25 or more for a Form 1040.
CPAs might charge between $50 and $100 an hour for the three or four hours it might take them to prepare a return. Because of the broad range of prices, it's important for consumers to know what they can expect to pay.
