Things to Consider Before Hiring a Tax Pro

Tax law gets more and more complicated with each year that passes. And with the passage of ObamaCare, which is administered by the Internal Revenue Service, even taxpayers with only a W2 are finding that the preparation of their income tax returns can be quite a challenge. Much of the data associated with your healthcare is now required to be included on your tax return.

There are approximately 100,000 pages of tax code and I’m sorry, but there isn’t a tax software product out there that can guarantee to translate your situation onto the proper forms. It really is important to understand tax law or at least hook up with a professional who does understand it and can help you provide the IRS and your state taxing agency with error-proof income tax returns. Keep in mind, in the final analysis, it is you, not the preparer who is responsible for the content of your tax return.

Who should you turn to? It’s important that you choose a preparer who is qualified and licensed. A statement released by the IRS says, “Attorneys, CPAs and enrolled agents can represent any client before the IRS in any situation.” And those are the titles you should look for when shopping for a tax pro.

Many states allow unlicensed individuals to prepare income tax returns. However, beginning in 2013, individuals who are tax return preparers and prepare all or substantially all of a tax return or claim for refund must obtain a preparer tax identification number (PTIN) through the Internal Revenue Service. Signing and nonsigning preparers are subject to the PTIN requirement. Make sure your preparer has a PTIN.

Why not select someone referred to you by the Internal Revenue Service itself? According to the IRS, “Taxpayers may search the directory using the preferred credentials or qualifications they seek in a preparer, or by a preparer’s location, including professionals who practice abroad. Tax return preparers with PTINs who are not attorneys, CPAs, enrolled agents or Annual Filing Season Program participants are not included in the directory, nor are volunteer tax return preparers who offer free services.”

That is a good start. But just because they are referred by the IRS doesn’t mean they are 100% reputable or even a good fit for you. You might want to check Yelp for reviews, check with the Better Business Bureau to see if there have been any complaints. If you are dealing with a CPA call the Board of Accountancy in your state to ensure their license is active. For attorneys, check with the State Bar Association. For Enrolled Agents, go to IRS.gov and search for “verify enrolled agent status” or check the Directory. 

Find out the fee you will be charged for the services provided. Is it reasonable? Stay away from preparers who charge a fee based on a percentage of your refund – especially if you are entitled to the Earned Income Tax Credit. You could end up paying an exorbitant sum compared to what other reputable preparers would charge. Also avoid those who boast bigger refunds than their competition – are they making up numbers to achieve that goal? And make sure that your refund goes directly to you – not into your preparer’s bank account.

Paid preparers who compile more than 10 tax returns annually are required to electronically file your tax return. Make sure your preparer offers IRS e-file services. According to the IRS, it “has safely processed more than 1.5 billion e-filed tax returns.”

A conscientious preparer will exercise due diligence by asking to see your records and receipts. He or she will ask questions to ensure that you are taking advantage of all deductions to which you are entitled and that you are declaring all income that must be reported. Do not use a preparer who will e-file your return using your last pay stub instead of your Form W-2. This is against IRS e-file rules.

Never sign a blank tax return. And don’t use a tax preparer that asks you to sign a blank tax form. You wouldn’t sign a blank contract, would you?

Before you sign your tax return, review it and ask questions if something is not clear. Make sure you’re comfortable with the accuracy of the return before it’s signed and filed. If you’re a non math type, ask a friend or relative to review your source documents and the tax return to ensure its accuracy. Then sign it and file it.

Do not use a preparer who refuses to sign the return. Check page 2 of your Form 1040 to make sure the return is signed by the preparer and includes his or her PTIN number in the field beside the signature box. By law, paid preparers must sign returns and include their PTIN. If the signature box says “self-prepared” do not file it. Take your documents and find a reputable preparer.

Be sure you get a copy of your tax return. If the preparer provides a PDF version to be stored on your hard drive, ask for it to be password protected.

Make sure the preparer’s office is open year round. If you get a nasty letter from the IRS in June or if you want to do some tax planning during the summer months, or if you are notified that you are being audited, you will need to contact your preparer after this year’s April 18 due date. Avoid fly-by-night preparers.

And if things do not go right and you feel that your preparer has violated ethical standards, report them. The IRS states, “Most tax return preparers are honest and provide great service to their clients; however, some preparers are dishonest. Report abusive tax preparers and suspected tax fraud to the IRS. Use Form 14157, Complaint: Tax Return Preparer. If you suspect a return preparer filed or changed the return without your consent, you should also file Form 14157-A, Return Preparer Fraud or Misconduct Affidavit. You can get these forms on IRS.gov at any time.

Each and every taxpayer has a set of fundamental rights they should be aware of when dealing with the IRS. These are your Taxpayer Bill of Rights. Explore your rights and our obligations to protect them on IRS.gov.”