Tax prep software isn’t always a bargain, or the right choice for you. Here are 10 situations when hiring a tax pro could save you money, time, and trouble.Full article
How to find a professional tax preparer you can trust
March 12, 2018
There are well over a million tax preparers in the United States, and most of them are unregulated. Seriously. Almost anyone with the required identification number from the IRS can do taxes for money. So it’s no big surprise that in a government undercover study, almost all of the paid preparers made mistakes. Yikes!
The thing is, no matter who prepares your tax return, you are responsible for getting it right — and for dealing with any trouble from the IRS if you don’t. So there’s more riding on your choice of preparers than the size of your refund.
Who can you trust to get the job done right? And get you the best refund too?
Here’s our four-step guide to finding and hiring a skilled tax preparer, complete with interview questions. Remember, you’re giving this person access to the financial equivalent of your diary. They'll know your income, your bank accounts, your social security number … everything. Some due diligence is in order!
Step 1. Decide on the type of preparer you want: CPA or EA?
As we were saying, anyone with a preparer tax identification number (PTIN) from the IRS can do your taxes. But you don’t want just anyone. Especially if you’re a homeowner, we recommend using either a certified public accountant (CPA) or a tax preparer designated as an “enrolled agent” (EA) by the IRS.
Unlike other types of accountants and tax preparers, both CPAs and EAs are licensed/credentialed, required to do continuing education, and can represent you before the IRS if there’s a problem. You’ll have your bases covered.
Now which one do you want? Here’s a side-by-side comparison that will help you understand the differences and decide what’s best for your situation.
Which one is right for you? Arguably, a CPA who specializes in tax prep is the ultimate. Definitely consider a CPA who’s up on tax code if your return has grey areas, you have complex investments, your business is booming, or you want financial planning too. But if your financial life is pretty straightforward, save a little money and go with an EA. Out-of-state returns? Choose an EA over a CPA, since they can work in every state.
Step 2. Find some professionals near you (yep, more than one)
To start your comparison shopping, track down a few EAs or CPAs who, preferably, work close to where you live. That way, you can hand-deliver all those sensitive financial documents. (Snail mail is second best.)
- Ask friends, family, and colleagues who they use. If their financial lives and issues similar to yours, all the better.
- To find EAs and CPAs, visit the IRS Directory of Federal Tax Return Preparers, where you can search by zip code and distance.
- You can also find EAs near you through the National Association of Enrolled Agents.
Step 3. Check their credentials and their track record
Now you want to double-check that these people are current on their credentials or licenses and haven’t been in any kind of trouble.
- For CPAs, verify that their license is current through your state board of accountancy. The Association of International Certified Professional Accountants has a handy page that links you to the right website in every state and US territory.
- For EAs, verify their status with the IRS. It can take a few days for the IRS to get back to you.
- Look them up at the Better Business Bureau, which gives a letter grade based on whether any complaints have been filed, how long they’ve been in business, transparency, and other factors.
- While you’re at it, check out their business website. Do you like what you see? Fact of life: It’s hard to take any pro with a bad website seriously.
Step 4. Interview your favorites
Again, you’re turning over your entire financial life to your tax preparer. So take a few minutes to go deeper, not to mention get to know them — you might be together for a long time. Here are eight important questions to ask:
What’s your PTIN? Anyone who prepares taxes for money must have a preparer tax identification number from the IRS.
What are your areas of expertise? Especially important if you’re concerned about a specific aspect of your financial situation.
Are you available year-round? You never know when tax issues or questions might come up. You don’t want a “pop-up” preparer.
How do you charge? By the hour? A flat fee? They probably won’t be able to tell you exactly how much they’ll charge, but it’s reasonable to ask for a range. The average for itemized tax prep is about $275, but it can be more or less depending on how complicated your return is, the preparer’s credentials, and how organized you are. (You’ll get the most for your money if you keep good, organized records.)
How do you work? Will the preparer personally do your return? If someone else in their office will be doing it, will they personally review and sign it?
How do you ensure security? How many people have access to clients’ info? How do they keep their network safe from hackers?
What paperwork will you need from me? At a minimum, they should insist on your forms W-2, 1099, 1098, and other verification of income and expenses. Many professionals will send you an organizing packet every year to help ensure that they’ll have all the right numbers and documents on hand.
What happens if I get audited? What’s the procedure, and how do they charge for their services?
Watch for these red flags
If you’ve chosen an EA or a CPA and verified their credentials, you probably won’t see any of these red flags. But FYI, walk away from preparers who . . .
- Claim they’ll get you a bigger refund than someone else
- Base their fee on a percentage of your refund
- Ask you to sign a blank tax form
- Don’t offer e-filing, which is the security standard today
- Imply IRS endorsement (the IRS doesn't do that)
- Won’t promise you a copy of your return
- Want your refund initially deposited into their bank account instead of yours
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Please note: The tax landscape is always changing. The information contained in this post is not intended as, and is not a substitute for, professional tax advice.
Filed Under: For Homeowners