Expert advice on vetting your tax preparer

For some taxpayers, they may opt to leave the heavy lifting to the professionals. In fact, the most recent data from the IRS showed that about 53.5% of taxpayers used a paid preparer during the 2016 tax-year. 

If you’re among those considering working with a tax preparer this tax season, you’ll want to make sure you entrust a qualified professional with your financial receipts and documents. 

What is a tax preparer and what do they do?

A tax preparer is a professional who prepares, files, or assists you with general tax forms. Any tax professional with an IRS Preparer Tax Identification Number (PTIN) is authorized to prepare federal tax returns. However, tax professionals have differing levels of skills, education and expertise.

“Unfortunately, anybody can be a tax preparer,” says Romeo Razi, CPA, and founder and operator of Taxed Right, which offers concierge tax services for small-to-medium-sized businesses. “However, the best credentials that someone can have are a CPA license or an Enrolled Agent license (EA). The EA designation is given by the IRS after a tax preparer had taken a test. Also, EAs and CPAs must take 40 hours of continuing education a year to keep their license (i.e., to stay up to date on tax law changes).” 

Apart from these credentials, tax preparers have varying levels of representation rights. Certain tax pros—specifically enrolled agents, certified public accountants (CPAs), and attorneys can represent their clients in the event of an IRS audit, payment or collection issues, and appeals. 

Should you use a tax preparer? 

It’s not necessary to use a tax preparer, but it can make things easier, especially if you have complicated taxes and own various assets.

Many online tax-filing softwares are easy to use and can give first-time filers advice on completing their return accurately. TurboTax, for example, offers free expert help for simple tax returns. And, for taxpayers whose adjusted gross income is $73,000 or less, free online tax preparation is available via the IRS Free File program.

However, major changes to your financial situation could make the help of a tax pro worth the investment. For example, you might consider working with a tax preparer if you are self-employed, own rental property, have recently moved to another state or had a change in your marital or filing status. 

How to choose and vet a tax preparer 

If you do decide to work with a tax preparer, you can begin your search for a tax preparer in your area online, the IRS also has a Directory of Federal Tax Return Preparers that allows you to search for a preparer based on your zip code, and allows you to filter preparers by their qualifications. Another way—ask your closest friends, family, and colleagues if they have any recommendations. 

“The number one way to find a CPA [or] tax preparer is through referrals. Ask your friends and family who they use, they’ll tell you the truth about their CPA,” says Razi. 

Once you do find a tax preparer, you’ll want to make sure that you do your homework to make sure it’s a good fit. 

1. Check your tax preparer’s qualifications. Before selecting a tax preparer, make sure that they have the background knowledge needed to prepare your taxes. “You should vet the tax preparer/CPA by checking that their credentials are active online,” says Razi. “All states have a CPA registry you can check to see if the tax preparer’s license is active.”
2. Look into your tax preparer’s history. You can reach out to your local Better Business Bureau to learn about any disciplinary actions your tax preparer may have faced in the past. For CPAs, you can also reach out to your state’s Board of Accountancy or your State Bar Association if an attorney is preparing your taxes. 
3. Ask your preparer about their service fees. “The National Association of CPAs publishes a survey every year that lets you know how much CPAs charge per region,” says Razi. When you’re choosing a tax preparer be sure to ask about the fees you’ll be responsible for. Heads up—the IRS urges taxpayers to be weary of tax preparers who base fees on a percentage of the refund or who boast bigger refunds than their competition.
4. Confirm that your preparer files taxes electronically. Ask your tax preparer about their filing process if you expect to receive a refund, filing your taxes electronically and submitting your direct deposit information could mean getting your refund a lot faster. 

The takeaway 

Turning to a tax pro for help this time of year can not only save you time, but it can also help you avoid mistakes on your return that could result in a delayed tax refund. However, before you hire a tax preparer, make sure to properly vet them to make sure that it’s a smooth process from beginning to end.