What to Keep in Mind When Choosing A Tax Preparer

The IRS publishes Tax Tips which you can find at IRS.gov along with many other helpful items. In January 2011 the IRS published Tax Tip 2011-06 titled Points to Keep in Mind When Choosing A Tax Preparer. We have updated their tips list to include some items that have recently become requirements.

If you pay someone to prepare your tax return, the IRS urges you to choose that preparer wisely. Taxpayers are legally responsible for what’s on their tax return even if it is prepared by someone else. So, it is important to choose carefully when hiring an individual or firm to prepare your return.

Here are a few points to keep in mind when choosing someone else to prepare your return:

  1. Check the person’s qualifications. Ask if the preparer is affiliated with a professional organization that provides its members with continuing education and resources and holds them to a code of ethics. New regulations require all paid tax return preparers including attorneys, CPAs and enrolled agents to apply for a Preparer Tax Identification Number — even if they already have one — before preparing any federal tax returns (beginning in 2011).
  2. Check on the preparer’s history. Check to see if the preparer has a questionable history with the Better Business Bureau and check for any disciplinary actions and licensure status through the state boards of accountancy for certified public accountants; the state bar associations for attorneys; and the IRS Office of Professional Responsibility for enrolled agents.
  3. Find out about their service fees. Avoid preparers who base their fee on a percentage of your refund or those who claim they can obtain larger refunds than other preparers.
  4. Make sure the tax preparer is accessible. Make sure you will be able to contact the tax preparer after the return has been filed, even after the April due date, in case questions arise. Many of the big box chains close local office after the filing deadline.
  5. Provide all records and receipts needed to prepare your return. Most reputable preparers will request to see your records and receipts and will ask you multiple questions to determine your total income and your qualifications for expenses, deductions and other items.
  6. Never sign a blank return. Avoid tax preparers that ask you to sign a blank tax form.
  7. Review the entire return before signing it. Before you sign your tax return, review it and ask questions. Make sure you understand everything and are comfortable with the accuracy of the return before you sign it. The best preparers will encourage you to sit with them and review the final product.
  8. Make sure the preparer signs the form and includes their PTIN. A paid preparer must sign the return and include their PTIN as required by law. Although the preparer signs the return, you are responsible for the accuracy of every item on your return. The preparer must also give you a copy of the return.
  9. Excellent preparation takes time. Preparing a return while you wait is the same as receiving off the cuff advice. Good advice should be thought through and properly confirmed by research into the rules and regulations. Using the same standards return preparation should include several steps including draft preparation, a separate review and the confirmation of complicated items. Rushing through return preparation is just asking for trouble down the road.
  10. Software development has opened the tax preparation field to unqualified and poorly educated opportunists. Beware of the hack who is only as good as the software allows. When the software fails so will your return.

There are new regulations for paid preparers which the IRS is rolling out in phases. The IRS is requiring tax preparers who prepare the form 1040 series to pass the Registered Preparer competency test and take continuing education courses annually. This does not apply to licensed Attorneys, Certified Public Accountants and Enrolled Agents all of which have been strenuously tested and meet heavy continuing education & ethics requirements annually to maintain their licenses.

The regulations are to protect those who are paying tax preparers from being ripped off by those not qualified to prepare returns. The IRS has not really gone far enough in this effort. The Registered Preparers competency test is not thorough enough to eliminate poorly trained preparers and only applies to preparation of the 1040 series (individual return preparation). In addition, the Registered Tax Return Preparer is limited in representation rights before the IRS to returns they have signed. So be aware of who you hire and understand, you get what you pay for.

At SDB Accounting & Tax Services, Inc. we can service all of your tax and accounting needs backed with more than 100 years of experience.