How to Choose a Tax Preparer

Choosing the right tax preparer is an important decision that can affect your financial well-being. A qualified tax professional can help you maximize deductions, ensure compliance, and provide valuable planning advice. This guide explains different types of tax professionals, what credentials to look for, and questions to ask when making your choice.

Types of Tax Professionals

Understanding the different types of tax professionals can help you choose the right one for your needs:

Certified Public Accountant (CPA)

CPAs are licensed by state boards of accountancy after passing a rigorous examination and meeting experience requirements. CPAs can provide a wide range of services including tax preparation, financial statement preparation, auditing, and consulting. They're subject to continuing education requirements and ethical standards enforced by their state boards.

Enrolled Agent (EA)

Enrolled Agents are federally licensed tax practitioners who have demonstrated special competence in tax matters by passing a comprehensive examination covering individual and business tax returns. They can represent taxpayers before the IRS in all matters including audits, collections, and appeals. EAs are licensed by the IRS and must complete continuing education requirements.

Tax Attorney

Tax attorneys are lawyers who specialize in tax law. They have completed law school and passed the bar exam. Tax attorneys are particularly valuable for complex tax situations, tax planning, legal tax disputes, and representing clients in tax court. Their services are typically more expensive than other tax professionals.

Annual Filing Season Program Participant

The IRS's Annual Filing Season Program recognizes tax return preparers who voluntarily complete a certain amount of continuing education and pass a tax law test. These preparers have a valid PTIN (Preparer Tax Identification Number) and are listed in the IRS's public database. This program is designed for preparers who are not CPAs, EAs, or attorneys.

Unenrolled Preparers

Unenrolled preparers have a PTIN but no professional credentials or special qualifications. They can prepare tax returns but cannot represent clients before the IRS except in limited circumstances. While some unenrolled preparers are experienced and knowledgeable, they have varying levels of expertise.

What to Look for in a Tax Preparer

Valid PTIN

All paid tax preparers must have a valid Preparer Tax Identification Number (PTIN) from the IRS. You can verify a preparer's PTIN status through the IRS's online directory. Never use a preparer who refuses to provide their PTIN.

Relevant Experience

Look for a preparer with experience handling tax situations similar to yours. If you're a small business owner, find someone experienced with business tax returns. If you have complex investments, find someone familiar with investment taxation.

Professional Credentials

Credentials such as CPA, EA, or attorney indicate specific qualifications and adherence to professional standards. These credentials require passing examinations and meeting ongoing education requirements.

Good Reputation

Check online reviews, ask for references, or seek recommendations from trusted sources. Be cautious of preparers with numerous complaints or negative reviews.

Availability Year-Round

Tax issues can arise throughout the year, not just during tax season. A preparer who's available year-round can help with tax planning, estimated payments, and questions that come up outside of filing season.

Transparent Pricing

A reputable preparer should clearly explain their pricing structure upfront. Avoid preparers who charge a percentage of your refund, as this can incentivize improper deductions.

Questions to Ask a Potential Tax Preparer

Before hiring a tax preparer, ask these important questions:

About Credentials and Qualifications

• What are your professional credentials (CPA, EA, attorney)?
• How long have you been preparing tax returns?
• What types of tax returns do you typically handle?
• Do you have experience with situations similar to mine?
• What continuing education do you complete to stay current on tax laws?

About Services and Process

• What services do you provide beyond tax preparation?
• Will you represent me if I'm audited?
• How do you handle tax planning throughout the year?
• What is your process for gathering information and preparing returns?
• How long will it take to complete my return?

About Pricing and Availability

• How do you structure your fees?
• Are there additional fees for complex situations?
• When is payment required?
• Are you available year-round for questions?
• What are your response times for client inquiries?

Red Flags to Watch For

Be cautious of tax preparers who exhibit these warning signs:

• Refusing to sign your return: All paid preparers must sign returns they prepare and include their PTIN
• Charging based on refund size: This can incentivize improper deductions and inflate refund claims
• Guaranteeing large refunds: No legitimate preparer can guarantee a specific refund amount
• Asking you to sign blank returns: Never sign a blank or incomplete tax return
• Directing refunds to themselves: Your refund should be deposited directly to your bank account
• Lacking a physical address: Be cautious of preparers who only operate online without a verifiable location
• Promising to "hide" income: Any preparer suggesting illegal tax evasion should be avoided

Verifying a Tax Preparer

Before hiring, take these verification steps:

• Check the IRS Directory: The IRS maintains a searchable database of preparers with valid PTINs and credentials
• Verify State Licenses: For CPAs, verify licensure with your state's board of accountancy
• Check for Disciplinary Actions: Research whether any disciplinary actions have been taken against the preparer
• Ask for References: Request references from current or past clients
• Review Online Feedback: Check reviews on Google, Yelp, and other platforms (but be discerning about online reviews)

Understanding Your Responsibility

Even when you hire a tax preparer, you remain legally responsible for the accuracy of your tax return. The preparer signs the return, but you sign as the taxpayer and are ultimately responsible for its contents. Review your return carefully before signing, ensure you understand all entries, and ask questions about anything unclear.

When You Need Specialized Help

Consider seeking specialized help for:

• Business ownership: Complex business structures, multiple entities, or significant business income
• IRS issues: Audits, collections, or disputes with the IRS
• International taxation: Foreign income, foreign accounts, or international business
• Estate and gift tax: Complex estate planning or large estates
• Tax court matters: Legal disputes that require representation in tax court

Making Your Decision

When choosing a tax preparer, consider:

• Your comfort level with the preparer
• Their experience with situations similar to yours
• Their professional credentials and qualifications
• Their availability and communication style
• Their fee structure and total cost
• Their reputation and references

Remember that the cheapest option isn't always the best. A qualified, experienced tax professional can save you money in the long run through proper planning and accurate filing.

Choosing the right tax preparer is an important decision that requires careful consideration. This guide provides general information about selecting tax professionals. Tax situations vary, and this content is for informational purposes only and does not constitute professional tax advice. For personalized guidance on your tax situation, please consult a qualified tax professional.