4 questions to ask before hiring a tax preparer

To take advantage of all the tax breaks available, preparers must keep up with changes in the tax code. Late last year, for example, Congress extended several deductions that had expired in 2009.

In most states, anyone can prepare taxes for a fee. There are no training or licensing requirements. Some individuals use the promise of low-cost tax preparation to sell dubious products, such as high-cost refund-anticipation loans.

That's changing, though. Last year, the IRS announced that tax preparers will be required to register with the government, pass a competency test and take continuing-education courses. The IRS plans to phase in the program over several years.

Starting this year, all paid preparers must obtain a Preparer Tax Identification Number from the IRS and include it on all returns they file. At this point, all a PTIN signifies is that the individual has registered with the IRS. Still, you should make sure a preparer has a PTIN. Someone who hasn't gone to the trouble to comply with this requirement may be slipshod in other areas.

Before hiring a preparer, check with your local Better Business Bureau to find out if there have been any complaints against the individual or company. Once you've done that, be prepared to ask some questions, including:

•Do you have any professional designations?CPAs, enrolled agents and attorneys must fulfill continuing-education and licensing requirements and are bound by ethical standards. They're also authorized to represent taxpayers before the IRS in all matters, including audits, collections and appeals. If the preparer doesn't have one of those designations, ask him if he belongs to any professional organizations that have continuing-education requirements.

•How much experience do you have with my type of return? Everyone has to learn the ropes somehow, but you probably don't want someone learning them on your tax return. Ask the preparer how long they have been preparing tax returns and whether they are familiar with your type of return.

•How do you determine your fees? Many reputable preparers charge a flat fee based on the complexity of your tax return. For example, someone with a 1040EZ will usually pay less than someone who has income from rental property and investments, she says. Ask the preparer to put the billing and payment terms in writing.

Steer clear of any preparer who bases fees on a percentage of your refund. Likewise, avoid preparers who claim they can get you a bigger refund than the guy down the street. No one can estimate your refund without first reviewing your financial information.

•Have you represented many clients in IRS audits? A preparer who has experience with IRS audits could provide valuable assistance if your return is scrutinized. But be wary of someone who has been through the process numerous times. That may be a sign he claims a lot of questionable deductions.

Keep in mind that you're responsible for the information on your tax return. Ideally, your tax preparer should e-mail or call with questions before completing your return. And you should always review and sign your return before it's filed with the IRS.