Getting Your Financial Ducks In A Row

Choosing a Tax Preparer

preparedIt’s that time of year again – time to do your income taxes.  While lots of folks will opt for the “box”, using one of the many do-it-yourself options like TurboTax, Tax Cut and others, many folks will choose to go to a professional tax preparer to have their returns prepared.

There are several types of professionals who are qualified to prepare your tax return: Certified Public Accountants (CPAs), attorneys, Enrolled Agents (EAs), and unenrolled tax preparers.  You’re likely familiar with CPAs and attorneys, so I won’t go into explaining them.  Enrolled Agents (EAs) are enrolled with the IRS and empowered to represent taxpayers before the IRS.  This type of professional must pass a rigorous series of exams to be enrolled, and then must complete 72 hours of continuing education every three years to remain enrolled.

CPAs, attorneys and EAs (as well as Enrolled Actuaries) are among a group known as Federally Authorized Tax Practitioners (FATPs).  There are other folks who are authorized to prepare taxes as well – but some of the qualifications are a bit up in the air at the moment.  The Registered Tax Return Preparer (RTRP) designation is to be the new designation for those outside the FATP group, but this designation has recently been challenged in court.  This leaves the unenrolled preparer group with no regulation – essentially it’s the wild, wild west, you don’t know what qualifications your preparer may have.  Sometimes, they even double as a Statue of Liberty <gasp!>.

So what should you look for when choosing a tax preparer?  The IRS recently issued their Tax Tip 2013-07, which lists Ten Tips to Help You Choose a Tax Preparer.  The actual text of the Tip is listed below:

Ten Tips to Help You Choose a Tax Preparer

Many people look for help from professionals when it’s time to file their tax return. If you use a paid preparer to file your federal income tax return this year, the IRS urges you to choose that preparer carefully.  Even if someone else prepares your return, you are legally responsible for what is on it.

Here are ten tips to keep in mind when choosing a tax return preparer:

  1. Check the preparer’s qualifications. All paid tax return preparers are required to have a Preparer Tax Identification Number.  In addition to making sure they have a PTIN, ask if the preparer belongs to a professional organization and attends continuing education classes.
  2. Check on the preparer’s history.  Check with the Better Business Bureau to see if the preparer has a questionable history.  Also check for any disciplinary actions and for the status of their licenses.  For certified public accountants, check with the state boards of accountancy.  For attorneys, check with the state bar associations.  For enrolled agents, check with the IRS Office of Enrollment.
  3. Ask about service fees.  Avoid preparers who base their fee on a percentage of your refund or those who claim they can obtain larger refunds than other preparers can.  Also, always make sure any refund due is sent to you or deposited into an account in your name.  Taxpayers should not deposit their refund into a preparer’s bank account.
  4. Ask to e-file your return.  Make sure your preparer offers IRS e-file.  Any paid preparer who prepares and files more than 10 returns for clients must file the returns electronically, unless the client opts to file a paper return.  IRS has safely and securely processed more than one billion individual tax returns since the debut of electronic filing in 1990.
  5. Make sure the preparer is accessible.  Make sure you will be able to contact the tax preparer after you file your return, even after the April 15 due date.  This may be helpful in the event questions arise about your tax return.
  6. Provide records and receipts.  Reputable preparers will request to see your records and receipts.  They will ask you questions to determine your total income and your qualifications for deductions, credits and other items. Do not use a preparer who is willing to e-file your return by using your latest pay stub before you receive your Form W-2. This is against IRS e-file rules.
  7. Never sign a blank return.  Avoid tax preparers that ask you to sign a blank tax form.
  8. Review the entire return before signing.  Before you sign your tax return, review it and ask questions.  Make sure you understand everything and are comfortable with the accuracy of the return before you sign it.
  9. Make sure the preparer signs and includes their PTIN.  A paid preparer must sign the return and include their PTIN as required by law. The preparer must also give you a copy of the return.
  10. Report abusive tax preparers to the IRS.  You can report abusive tax preparers and suspected tax fraud to the IRS on Form 14157, Complaint: Tax Return Preparer.  If you suspect a return preparer filed or altered a return without your consent, you should also file Form 14157-A, Return Preparer Fraud or Misconduct Affidavit.  Download the forms on the IRS.gov website or order them by mail at 800-TAX-FORM (800-829-3676).
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