How to find a good tax pro

No wonder the thought of preparing your tax return is making your palms sweat — there are more than 7 million words in our tax code and regulations! Doing your own taxes is admirable, but using a good tax pro can be worthwhile, as he or she might help you maximize deductions and credits.

Here’s how to find a good pro:

(1) Ask for referrals from people you respect. Accountants can buy advertising but not satisfied clients.

(2) Ask for an interview. The accountant should be willing to give you some time (at no charge) to discuss and assess your situation. At that time, ask the following questions:

• How big is your firm? (Determine how important your business will be: Avoid ending up as a little frog in a big pond.)

• What are your fees and billing policies? (Ask for an estimate.)

• Who exactly will be preparing my taxes — you or somebody else? If I have problems or questions, do I speak with you?

• What are your continuing professional education (CPE) requirements, and how many CPE hours do you normally take each year? (If she exceeds the requirements, that’s a good sign.)

• What research material do you use and subscribe to? (Answers like “CCH,” “Research Institute” and “BNA” are encouraging. If the answer is merely the current Federal Tax Handbook, say goodbye. When complicated problems arise that require deep research, you don’t want her winging it.)

• If my return is audited, will you represent me before the IRS? (She should go instead of you, not with you. If the accountant sources out the audit work, think twice before signing up. If she insists you also be present at an audit, think a third time.)

• Can you get the return done on time?

Finally, select someone with whom you’re comfortable and with whom you can work well, providing the information she needs to serve you well. In the meantime, get tax tips at www.fool.com/taxes and www.irs.gov.

Ask the Fool

Q: On the advice of a friend who was making lots of money several years ago, I bought some shares of Cisco Systems for $124 each. They’ve recently been trading in the high $20s range. I will not sell them for such a loss. Will this stock ever recover? — Irma S., Orange Park, Fla.

A: First off, know that when you see a Cisco stock price of, say, $30, today, you’re looking at a number that’s “split-adjusted.” If you bought your shares in June 1999 for $124, the stock split 2-for-1 twice after that, reducing your purchase price from $124 to $62 and then to $31, not far at all from the stock’s recent range. If you bought at $124 in early 2000, though, your split-adjusted purchase price would be $62, meaning you’re still down more than 50 percent.

But as a prudent investor, you need to set the past aside and look to the future. What matters is how you expect your shares to perform from here. If you don’t have a good handle on Cisco’s financial strength and competitive position, or any compelling reason to hang on, consider selling. Remember that you might stand a better chance of making your lost money back in some other company in which you have more faith.

My dumbest investment

I sold Wal-Mart in 1996, sold Google at $320, sold Apple at $50, kept Advanced Micro Devices too long, didn’t keep Nokia long enough … See a pattern here? So far I stink, but I made more than 20 percent on my own picks in 2006. Not too shabby, I guess. — Z.O., via e-mail

The Fool Responds: Wal-Mart stock has quadrupled in value over the past decade, Google stock has passed the $500 mark, and Apple has traded around $100 per share recently. Don’t feel too bad, though. Every investor messes up now and then, buying the wrong thing or selling the right thing, or holding on too long or not long enough.