5 Tips for Choosing a Tax Preparer
Following these tips will help you weed out the fly-by-night preparers and zero in on the best tax professionals in your area.
You're really organized and on top of things this tax season. Good for you! You received all your W-2s and 1099s, you collected all your financial statements and receipts, and now it's time to find someone to prepare your tax return. But there's one problem…you're not quite sure how to go about choosing a tax preparer.
It goes without saying that you want someone who's qualified. But how do you know? You want someone who's honest and reliable, too. But, again, how do you know? The last thing you want to do is search online for "tax preparers near me" and randomly pick a preparer from the list, but sometimes it feels like there's no better way.
Relax. There is a better way. Follow these 5 tips for picking a tax preparer to help you weed out the fly-by-night preparers and zero in on the best tax professionals in your area. With a little bit of time and a few targeted questions, you can find a competent and dependable preparer to complete and file your return.
Verify the Preparer's Credentials
There are a lot of people out there claiming to be a "tax professional." However, just because someone hangs out a shingle and advertises tax prep services, it doesn't mean they actually have the skill, education, and expertise to handle your return.
To increase the odds of finding a qualified tax preparer, look for someone who is credentialed. You're much more likely to get a competent preparer if they've been vetted by the IRS or a state regulatory board. The most common types of credentialed preparers are certified public accountants (CPAs), enrolled agents, attorneys, and annual filing season program participants.
CPAs are licensed by state boards of accountancy, studied accounting at a college or university, and have passed a rigorous exam. They must also satisfy ethical requirements and take continuing education classes to keep their license.
Enrolled agents are licensed by the IRS. They must pass a comprehensive exam, which requires them to demonstrate proficiency in federal tax return preparation, and complete 72 hours of continuing education classes every three years.
Attorneys are licensed and regulated by state courts and/or state bar associations. They graduated from law school and passed a bar exam. In addition, attorneys must also take continuing education classes and satisfy professional ethics requirements.
The IRS also runs a voluntary program that recognizes the efforts of return preparers who are not CPAs, enrolled agents, or attorneys. It will issue an Annual Filing Season Program Record of Completion to tax return preparers who obtain a certain number of continuing education hours for a specific tax year.
You can use the IRS's Directory of Federal Tax Return Preparers with Credentials and Select Qualifications to find a tax return preparer in your area with the credentials described above.
Check the Preparer's Professional Record
You have to be able to trust your tax preparer. Afterall, he or she will know all about your finances and even have your Social Security number. And even if a preparer is credentialed, that doesn't guarantee that he or she has a good professional reputation. That's why it's smart to check a preparer's history before handing over your tax and financial documents.
The Better Business Bureau is a good place to start if you want to check up on a preparer's reputation. They grade thousands of preparers based on a variety of factors, including complaints from customers, how long they've been in business, licensing violations, and truthfulness in advertising. The BBB assigns grades ranging from A+ (the highest) to F (the lowest).
For credentialed preparers, you might also want to check on their licensing status and look for disciplinary actions against them. For CPAs and attorneys, check with the state regulatory board in charge of licensing. For enrolled agents, go to the IRS's enrolled agent status webpage.
Also make sure the preparer will be around and accessible after your taxes are filed. If there's a problem with your return, you want to know that the preparer is there to help resolve any issues with the IRS.
Ask About Fees
As with any other service or product you buy, make sure you have a good idea of the costs ahead of time. Prices for tax return preparation can vary widely depending on a variety of factors, including the complexity of your return, where you live, and the preparer's experience. That's why it's important to get a quote before settling on a preparer.
You might not get an exact price up front, but at least make sure you understand how the price is determined. For example, a preparer might have a set fee for each form required, charge you by the hour, or start with a minimum fee and tack on additional costs depending on the complexity of your return. However, walk away if a preparer bases his or her fee on a percentage of your tax refund—you don't want a preparer claiming questionable tax breaks on your return in order to inflate the fee.
Also make sure you understand what's covered for the quoted price. Does it include preparation of your state return? Will you be charged extra for e-filing or office visits? Does the price include any type of audit protection if the IRS flags your return? Ask these questions up front.
Don't give tax documents, Social Security numbers or other information to a preparer if you're simply inquiring about their services and fees. According to the IRS, some dishonest preparers have used this information to improperly file returns without the taxpayer's permission.
Watch for Problems After Selecting a Preparer
Your due diligence doesn't end after you pick a preparer. Watch out for warnings signs that something isn't quite right. If one of these red flags pop up, you should seriously consider switching to another preparer right away.
First, don't ever sign a blank tax return. Run for the hills if a preparer asks you to do this! It's just as bad as signing a blank check.
Once the return is completed, make sure you get a chance to review it before signing it. If you have any questions or if something is not clear, the preparer should take the time to answer your questions. You have to feel comfortable with the accuracy of the return before you sign it, because you're accepting responsibility for the information on the return when you sign it. You should get a copy of the completed return, too.
Also make sure the preparer signs the return and includes his or her Preparer Tax Identification Number (PTIN) at the end of your 1040 (bottom of page 2). This is required by law. Not signing a return is a big red flag that the preparer is up to no good. Also, all paid tax preparers are required to have a PITN, so don't let them tell you they don't need one.
If you're due a refund, double check the bank routing number and account number on Line 21 of Form 1040 before signing the return. Make sure your refund will be deposited directly into your bank account—not into the preparer's account!
In addition, make sure the preparer offers to file your return electronically. Paid preparers who do taxes for more than 10 clients generally must file electronically. However, don't let a preparer e-file your return using a pay stub instead of a Form W-2. That's against the IRS's e-file rules.
Report Problems to the IRS
You can also file a complaint against a CPA or attorney with the appropriate state regulatory board.