Tax preparation services are an alternative to using tax software or doing your taxes yourself on a printed-out 1040 form. Generally, people who use tax preparation services are a) willing to pay someone else an average of $190 for the luxury of not preparing their taxes themselves, or b) want to file early and receive their refunds quickly in the form of "refund-anticipation loans."

Here's what the experts say to keep in mind when using a tax preparation service:

  • Never patronize a firm that sets your fee as a percentage of your refund. This is illegal, unethical, or both, and gives the preparer the incentive to commit fraud. The cost of your return should be based on its complexity, not the amount you expect to have refunded.
  • Find out how the fee is determined, and get an estimate of what it will be. Do this before you decide to use a particular tax preparation service.
  • Ask how much training and experience your tax preparer has. If you're not confident in him or her, ask to have a supervisor look over your tax return before you leave.
  • Take out a refund anticipation loan only as a very last resort. If you absolutely, positively have to have your refund immediately (for example, if you're about to be evicted from your home), you may have no choice but to opt for a RAL. But if you have no particular need for the money, you're better off waiting for your government refund, rather than paying extra for fees and interest on a loan. With e-filing and direct-deposit, most will receive their refunds within two weeks without resorting to a RAL.
  • Don't pay extra for "audit insurance." Most chains have a paid option that supposedly entitles you to an increased level of representation or restitution if you're audited by the IRS. Experts say these paid plans don't offer anything useful on top of a firm's core guarantee.
  • Don't feel pressured to sign up for services you don't need. Firms like H&R Block and Jackson Hewitt make a lot of their money by offering banking services, usually for high fees. If you're just looking to have your taxes done, don't let yourself be talked into high-cost IRAs, loans or savings accounts.
  • Look over your return carefully. If there's a major error in your tax return, you're the one who's on the hook, not your tax preparer. If you see major errors in your return, demand to have it redone (for free) by another preparer, or a supervisor, at the same chain.
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