Finding a qualified and trustworthy tax preparer is crucial for ensuring your taxes are filed properly and you receive all the deductions and credits you deserve. However, with so many options to choose from, how can you tell which tax preparers are truly legitimate professionals versus scammers looking to take advantage? Here is a thorough guide on researching, evaluating and selecting a reputable tax preparer.
What certifications should a tax preparer have?
There are a few key certifications a legitimate tax preparer should hold. These include:
- CPA – Certified Public Accountant
- EA – Enrolled Agent
- AFSP – Annual Filing Season Program participant
CPAs are accountants with extensive tax law expertise and qualification exams. EAs are licensed by the IRS and specialize in taxation. AFSP participants take IRS exams annually to stay updated on tax law changes.
Some states require tax preparers to be licensed. Check if your state has any mandatory licensing or regulations.
What education and experience should they have?
In addition to certifications, a quality tax preparer should have:
- A degree in accounting, finance or related field
- Ongoing continuing education credentials
- 5+ years of recent paid tax preparation experience
You want someone knowledgeable and competent, not an amateur without the proper educational background and training.
Are they available year-round?
Many temporary tax preparers only work during tax season and may be unavailable during audit or amendment processes. Look for a preparer available 12 months of the year for questions, tax planning and audit support.
Do they specialize in your tax situation?
Those with expertise in your specific tax needs can maximize deductions. For example:
- Self-employed filers – CPAs, EAs
- Expats – Preparers licensed abroad
- Itemizers – CPAs, EAs
- Business owners – CPAs, EAs
Ask if they have experience handling returns like yours.
Will they sign and stand behind the return?
Quality preparers will sign the return and provide their PTIN tax ID number. This demonstrates responsibility for the accuracy of your filing. They should also offer audit assistance and be accountable for any errors.
Do they have solid references and reviews?
Search online for ratings, reviews and complaints. Ask for references from past clients with situations similar to yours. Take note of any concerning accusations or fee disputes.
What questions should I ask a potential preparer?
Here are some key questions to ask when vetting a tax pro:
- What credentials and certifications do you hold?
- How many years of experience with individual tax preparation do you have?
- Do you handle state taxes and other tax forms too?
- How can I contact you during the year if I have tax questions?
- Will you represent me if I get audited and what will you charge?
- Can you provide references from clients with situations similar to mine?
- Do you outsource any work to third parties?
- How do you determine your preparation fees?
What tax preparation credentials should I avoid?
Steer clear of preparers who:
- Only have online diplomas or certificates
- Are not year-round tax professionals
- Cannot provide a PTIN and business license
- Refuse to sign returns they prepare
- Claim unrealistic refunds or extremely low tax liability
- Require payment as a percentage of your refund
How can I check a tax preparer’s credentials?
You can verify credentials using the IRS Directory of Federal Tax Return Preparers tool on IRS.gov. It lists a preparer’s qualifications, location, and any disciplinary actions against them. Checking with state boards and professional associations provides additional insight.
What are “red flags” to watch out for?
Be wary of preparers who:
- Only accept cash payments
- Refuse to sign the return
- Fail to provide a mailing address and contact info
- Promise excessively large refunds
- Charge contingency fees based on refund size
- Offer to submit returns without you signing them
- Prepare multiple amended returns fishing for more refunds
Unethical behavior like this signals potential fraud and scams.
Can I deduct tax preparation fees?
Tax preparation fees can be deducted on your return if you itemize. The fees are subject to the 2% limit for miscellaneous deductions. Most filers claim the standard deduction, so the fees are not deductible.
How much should quality tax preparation cost?
Rates vary based on complexity, but expect to pay:
- Simple return – $150-$300+
- Itemized return – $200-$500+
- Business return – $300-$1,000+
- Expat/foreign income – $300-$600+
CPAs and EAs often charge $200-$500+ per hour. Tax chains advertise returns for $100-$300. Beware very cheap services.
Should I choose an individual preparer or tax preparation company?
| Individual Preparer | Tax Preparation Company |
|---|---|
|
|
An individual CPA or EA often provides more tailored guidance, while tax chains offer more accessibility.
Should I use online/software tax filing?
Pros:
- Convenience and ease of use
- Often lower costs
- Good for simple, straightforward taxes
Cons:
- Lack of personalized guidance
- May miss deductions
- Not ideal for complex taxes
Online filing works for W-2 earners claiming the standard deduction. Those with investments, businesses, etc may benefit from an accountant.
What tax documents should I gather?
Grab the following to bring to your tax appointment:
- Photo ID
- Social Security cards for you, spouse, dependents
- W-2s
- 1099s for income, unemployment, retirement plans
- Interest, dividend and other investment statements
- Records for rental property income/expenses
- Business income and expenses
- Records of educational expenses
- Health insurance forms
- Last year’s tax return
When should I start looking for a tax preparer?
It’s best to research tax preparers well ahead of tax season. Many quality CPAs and EAs book up by December or January. Start your search in the fall and meet with prospects early to allow time for evaluation and coordination.
How can I ensure accuracy in my tax preparation?
Strategies for optimizing accuracy include:
- Thoroughly collecting all tax documents
- Choosing a highly experienced preparer
- Completely disclosing all income sources
- Keeping detailed records of deductions and credits
- Reviewing the return carefully before signing
- Asking questions and understanding the contents
Take an active role, don’t just hand your taxes over blindly. Inform your preparer about anything that could impact your finances that tax year.
What questions should I ask when reviewing my prepared return?
When examining your prepared return, ask:
- Is all my income properly reported?
- Are these deductions and credits applicable to my situation?
- Does my tax liability seem accurate based on my income?
- Do you anticipate my being audited based on anything reported?
- Did you take X, Y, Z into consideration when preparing the return?
Make sure you understand each number before signing off.
What are the penalties for using an unethical preparer?
Consequences can include:
- Paying back taxes owed plus interest and penalties
- Additional “accuracy” penalties of 20% of tax underpaid
- Possible criminal prosecution for willful errors
- Barred from deducting preparer fees
- Wasted money on fraudulent refund claims
You are legally responsible for your return, so using an unscrupulous preparer can generate major headaches.
How can I report a suspicious tax preparer?
To report questionable behavior, contact:
- IRS Office of Professional Responsibility
- IRS Inspector General hotline
- State licensing boards
- State attorney general
- Better Business Bureau
Alert the proper authorities about any dishonest or abusive tax preparation practices.
Conclusion
Finding an ethical, competent tax professional takes research and diligence. Verify credentials, experience, reputation and expertise before choosing. Ask probing questions and thoroughly review your return before filing. With the right preparer, you can maximize deductions, avoid mistakes and evade scams. Take time to vet thoroughly, as your preparer has a huge impact on your finances and peace of mind.
