HOW TO CHOOSE A TAX PREPARERBondBeebe
Glenn Bailey, CPA
If you need help with your tax returns, the best time to choose a preparer is before the end of the year. That way you have time to find someone with the appropriate skill level for your situation and time to get on their schedule. Having a preparer with advance knowledge and understanding of your life can make your tax return preparation more efficient for the preparer and less stressful for you. Waiting until March can leave you at the mercy of the market. The most competent firms and preparers may not have time to do anything for you except file an extension at that point.
Starting early will give you time to sit down with a preparer and discuss your particular circumstances so the preparer can understand what services you will need and so you can understand the preparer’s knowledge level for your situation. There is also time to accomplish any tax planning that might be beneficial to you. After the end of the year there’s not much planning ability left.
What should you look for in a preparer?
The IRS issued a news release (IR2015-124) that lists some of the things to look for, and to watch out for. Here are some tips and information to consider:
- Be aware of the preparer’s credentials. The most knowledgeable, trained preparers will generally be Certified Public Accountants (CPAs), Attorneys, or Enrolled Agents (EAs). These designations require extra education, testing and licensing.
- Select an ethical preparer. Taxpayers entrust some of their most vital personal data with the person preparing their tax return, including income, investments and Social Security numbers. CPAs and Attorneys are licensed by their states and bound by a code of ethics. EAs are credentialed by the IRS and bound by a code of ethics. Many states and the IRS have an annual ethics class requirement for their license-holders as well.
- Ask about fees. Avoid preparers who base their fee on a percentage of the refund or those who say they can get larger refunds than others. Taxpayers need to ensure that any refund due is sent to them or deposited into their bank account, not into a preparer’s account. You are paying for a preparer’s use of their knowledge and experience to prepare your returns so the low bidder may not be the best choice if you have a more complex tax situation.
- Be sure to use a preparer with a preparer tax identification number (PTIN). Paid tax return preparers must have a current PTIN to prepare a tax return. It is also a good idea to ask the preparer if they belong to a professional organization and attend continuing education classes. CPAs are generally required to attend 40 hours of continuing education per year (VA is 120 hours every 3 years, DC & MD are 80 every 2 years), EAs require 72 hours every 3 years.
- Research the preparer’s history. Check with the Better Business Bureau to see if the preparer has a questionable history. For the status of an enrolled agent’s license, check with the IRS Office of Enrollment (enrolled agents are licensed by the IRS and are specifically trained in federal tax planning, preparation and representation). For certified public accountants, verify with the state board of accountancy; for attorneys, check with the state bar association.
- Ask for e-file. It is faster, more secure and more accurate than filing a paper return. Generally any paid preparer must file the returns electronically
- Provide tax records. Discuss your situation with your preparer ahead of time. Make sure they are experienced in your particular field or industry if you have a business or specific kinds of investments. A good preparer will ask to see records and receipts. Do not use a preparer who is willing to e-file a return using the latest pay stub instead of the Form W-2. This is against IRS e-file rules.
- Make sure the preparer is available after the filing due date. This may be helpful if questions come up about the tax return. Taxpayers can designate their paid tax return preparer or another third party to speak to the IRS concerning the preparation of their return, payment/refund issues and mathematical errors.
- Review the tax return and ask questions before signing. Taxpayers are legally responsible for what’s on their return, regardless of whether someone else prepared it. Make sure it’s accurate before signing it.
- Never sign a blank tax return. If a taxpayer signs a blank return the preparer could then put anything they want on the return — even their own bank account number for the tax refund.
- Representation rights: CPAs, EAs and attorneys have unlimited representation rights before the IRS. This may be important to you if you are audited or have payment or collection issues.