Print Posted by National Association of Tax Professionals on 09/24/2014

How to Find the Right Tax Professional

How to Find the Right Tax Professional

Do you know a deduction from a credit? Are you subject to Alternative Minimum Tax? Do you know if you have the minimal essential health care coverage to meet the individual responsibility requirement under the Affordable Care Act? Are receipts required before claiming charitable donations? If you don’t know the answer to these questions, or pretty much any other tax-related questions, you’re not alone. 

 

Tax law is not getting easier to understand and consumers are finding that software packages do not ensure correct preparation. Tax preparers frequently see clients who tried it on their own, had errors, and then needed help sorting it all out when the IRS sends them a penalty notice. Many times the errors are the result of incorrect entries and misunderstanding the questions. Errors often do not go in a taxpayer’s favor. These errors can leave a person facing taxes, interest and penalties, and in some cases, criminal prosecution.

 

Some errors are not evident on the face of the tax return, but may be discovered later when the IRS matches payment documents with the taxpayers’ returns, or audits returns for particular items. For example, a taxpayer may fail to report wages, interest, dividends, sales of stock, tips or other income. The IRS matches payment records from employers, banks and brokerages to what is reported on the tax return. If the IRS finds an omission, it notifies the taxpayer about the proposed additional tax, plus interest and any applicable penalty.

These are usually the clients who remain with a preparer for life.  

 

If you decide that obtaining a tax preparer is the best decision for you, be sure that the tax preparer you are hiring is qualified. The IRS requires all paid tax preparers to register with the IRS and to obtain a preparer tax identification number (PTIN). Do not let someone prepare your taxes if they don’t have a PTIN. Also, all tax preparers must sign the return they prepare, avoid those who are unwilling to sign the return. Never sign a blank return!

 

Finding a trustworthy tax return preparer is important as they will have access to your most personal information. They know about your marriage, your income, your children and your social security numbers – the details of your financial life including the various bank accounts you have.

 

Most tax return preparers provide outstanding service. However, each year, some taxpayers are hurt financially because they choose the wrong tax return preparer. The following are 11 things to help you pick a qualified tax preparer.

 

When determining who should be your tax professional, ask them what their qualifications are. Many tax professionals have a designation in which they achieved from reputable source including (but not limited to): Certified Public Accountant (CPA), Enrolled Agent (EA), attorney (JD) and Certified Financial Planner (CFP). Also, many states now have programs for tax professionals as well as the IRS has a new voluntary program called the Annual Filing Season Program (AFSP), in which the tax professional must take a designated amount of continuing education. (More about designations below.)

Ask if they are up-to-date on their continuing education requirements. The tax law is ever changing and there are always new regulations and tax forms that the preparer needs to be refreshed on.

Ask if they are affiliated with a professional organization, such as the National Association of Tax Professionals (NATP). All NATP members agree to a strict code of ethics and standards of professional conduct. 

Check with the Better Business Bureau to make sure they don’t have a questionable history. Check for disciplinary actions and for the status of their licenses.

Ask about service fees.  Avoid preparers who base their fee on a percentage of your refund or those who say they can get larger refunds than others can. Always make sure any refund due is sent to you or deposited into your bank account. 

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 generally must file the returns electronically.

Make sure the preparer is available.  Make sure you’ll 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 come up about your tax return. Some unscrupulous preparers will disappear after the filing season with your personal information and refunds.

Good preparers will ask to see your records and receipts. They’ll ask questions to determine your total income, deductions, tax credits and other items. Do not use a preparer who is willing to 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 return.  Don’t use a tax preparer that asks you to sign a blank tax form.

Review your return before signing.  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 you sign it. Remember, even if you don’t prepare your own return, you’re still legally responsible for what is on it.

Review your return before signing.  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 you sign it.

 

Tax professionals have differing levels of skills, education and expertise. The most important difference in the types of preparers is “representation rights”. 

 

Representation rights is whether the tax preparer has the ability to discuss your tax situation with the IRS—this includes responding to certain correspondence between you and the IRS including audits, payment/collection issues and appeals. Here is guidance on each credential:

 

Enrolled Agents are licensed by the IRS and specifically trained in federal tax planning, preparation and representation. Enrolled agents hold the most expansive license IRS grants and must pass a suitability check, as well as a three-part Special Enrollment Examination, a comprehensive exam that covers individual tax, business tax and representation issues. They complete 72 hours of continuing education every 3 years.

Certified Public Accountants are licensed by state boards of accountancy and have passed the Uniform CPA Examination that covers accounting audits, financial reporting, regulation of business law and taxation, and other financial topics. 

Attorneys are licensed by state courts or their designees, such as the state bar. Generally, requirements include completion of a degree in law, passage of a bar exam and on-going continuing education and professional character standards. 

Annual Filing Season Program – Record of Completion are preparers who met basic IRS education and filing season readiness requirements. These preparers have limited rights and may only represent clients whose returns they prepared and signed.


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