How to Select The Best Tax Preparer

Tax time is stressful for most everyone. Whether you have a modest tax prep, are expecting a significant refund, or dreading the balance due, we all need a little help sometimes. Then there is the ever-changing tax system, and tax reform, which can render you feeling as though choosing a tax preparer is the most daunting task you can endure. Did you know that, because needs change and the relationship is no longer productive, the average person changes their tax preparer every three years? So how do you know who the right person is for YOU? There are hundreds of “tax guys” in any given city; most people know at least one.

Not to mention the plethora of CPA firms and companies that will do tax prep while you shop. So, what must you look for in a tax preparer? While numerous factors will be explored in this article, one thing to make crystal-clear is that the price should not be a deciding factor. You wouldn’t skimp on doctors or lawyers; don’t cut corners by getting a bargain-basement tax preparer, or you could end up with an expensive (and possibly illegal) disaster on your hands. Respectable tax preparers are extensively trained, ethical and available to serve your needs.

1. PTIN

As of February 1, 2018, there are 704,363 registered tax preparers in the United States. The PTIN (preparer tax identification number) must be applied for through the IRS; there is no other way to get it. The IRS verifies the tax preparer is who they say they are and that they are current on their income taxes. Do you want to work with a financial professional who doesn’t pay their taxes? This identification number is a security measure for the tax preparer. Just like you don’t want your social security number floating around the world, they don’t either.

Instead, the PTIN is a replacement number for tax purposes only, and the IRS requires it for anyone who charges a fee for preparation; it must be renewed every year. If you come across a tax preparer without this number, that means the IRS does not know who they are, and they are not registered to prepare tax returns professionally. Be sure this is a necessity when you are choosing a tax prep provider. One thing to note about this credential: this identification number only allows a person to prepare taxes for compensation; not to represent you in the event of an audit.

2. History

How much experience does the tax preparer have? The more complicated your tax circumstances are, the more important this question is. Tax prep may seem simple, but there are nuances in the tax laws that a more seasoned professional will know that the person is just starting out won’t. Do their clients undergo “too many” audits for your comfort level? History is not just experience; review the BBB for issues or the State Board of Accountancy (for CPAs only) for any disciplinary actions; lawyers and Enrolled Agents can also be substantiated through the State Bar Association or the IRS Directory respectively.

3. E-File

In today’s day and age, this seems like a no-brainer, but you would be surprised how many tax preparers do not use e-file. It is safer, more efficient and the standard for professional tax preparers. This practice is another way to certify your information is secure. The IRS authorizes all e-file providers through an in-depth application about the preparer and their business, and they must submit fingerprints. The IRS has exceedingly high standards for providers; consequently, out of the 700,000+ registered preparers, there are only 329,794 ERO providers in the United States. If your tax preparer still files on paper, wonder why.

4. Provide records and receipts

Be prepared to answer questions and provide backup to a high-quality tax preparer. If your tax preparation is completed with your last pay stub, that’s not a good sign (and against IRS regulations). A trustworthy tax preparer will interview you while looking over your paperwork, often asking for more records and receipts. While you may feel “annoyed” at the extra work, this is done to save you both money and stress. If you overlooked that savings account from six years ago and it earned interest, you would get a tax notice because it wasn’t reported; thereby spending more time, money and headaches dealing with it.

5. Avoid Blank Returns

For some people, this is common sense, but for others who are new to taxes, they might not know any better. To put it frankly, never sign a blank tax return and don’t work with anyone who asks you to. An unscrupulous preparer can file your tax return without you ever looking at if they have your signature. While it’s not always an intentional fraud, errors occur even with software. It is crucial that you review your tax return before signing it; this is your final authorization that everything is correctly reported. The IRS will come after you – not the preparer.

6. Availability

Try to avoid seasonal preparers. They are convenient and inexpensive, but they are also often not around after “tax season” when you get a tax notice about a discrepancy or if you just have a question. Being able to reach someone is especially crucial if you plan on filing an extension or have a significant, foreseeable, life change. Having a tax preparer with the availability to take a phone call or reply to an email can be an immense relief during an otherwise stressful time. Not to mention, the best time to change tax preparers is in the summer when they have the attention you want.

7. Reviewing a Return

As mentioned earlier, it is your responsibility to review the prepared tax return for completeness and accuracy. Ask questions if you don’t understand something. The preparer should be able to answer without hesitation. Verify the bank account information is yours. The review should be the last step before you sign the forms. You wouldn’t sign a contract without reading it; don’t sign a tax return without reviewing it. If a tax preparer does not offer this to you, you have the responsibility to require it before approving, and you should begin searching for a new preparer for next year.