The complexities of filing taxes increase every year, prompting more people to turn to professional tax preparation services. You may even be planning to count yourself among these people if your personal financial situation has grown overly complicated.
Hiring a professional to file your taxes may be a good way to save time, but even that decision can be more intricate than many people realize. Your money and reputation are at stake, so the stakes are high.
The IRS urges all taxpayers to employ care and caution when choosing a tax professional, as these professionals will not relieve people of the legal responsibilities of their tax returns. There is no doubt that most professional tax preparers are honest people who provide excellent services to their clients, but there are still unscrupulous tax preparers out there who can cause their "clients" considerable legal and financial difficulties.
The IRS doesn't certify tax preparers, and the federal government does not require tax professionals to have any form of certification or education. Some states do require tax preparers to be licensed, but that is an industry that remains largely unregulated. In other words, most of the time you cannot be sure that the "professional" you have hired to file your taxes is qualified to do the job.
The IRS does license Enrolled Agents who must pass an exam and have continuing education to maintain their licenses. The Treasury Department authorizes these Enrolled Agents to represent taxpayers at all levels of an audit.
When you hire a tax preparer, verify whether they will be able to provide you with representation if the IRS audits your return. This is also a good opportunity to inquire about the preparer's audit rate.
The important thing is that you know precisely what you are paying for. Confirm that you are hiring someone who specializes in tax preparation (CPA is a designation indicating a qualified accountant who may or may not be a tax specialist).
Always investigate your preparer's credentials and/or the business for which he or she works. Don't be afraid to contact the Better Business Bureau to verify that the preparer and/or business does not have a questionable history.
You can also contact the board of accountancy for CPAs or the bar association for attorneys in your state to further inspect the preparer's professional record.
Qualities of a legitimate and reputable tax preparer include:
- Affiliation with an organization that requires continuing tax education
- A preparation fee based on the complexity of your return
- A willingness to answer all of your questions
- Availability beyond the preparation and filing of your tax return
- Familiarity with all of the states in which you must file
- Familiarity with any special circumstances that may apply to you
- A willingness to include an itemization of all judgment calls with your copy of the return
-A willingness to provide an in-person review of the refund with the preparer.
Warning signs that may indicate a disreputable tax preparer include:
- Claims that they can obtain larger refunds than their competitors;
- Guarantees of a refund up front;
- A request that you sign a blank form;
- Tax preparers who are unwilling to sign a return (this is known as "ghost" preparation).
It is very important that you thoroughly discuss your financial situation with your tax preparer. Once you are confident that your tax professional is competent, reputable, respected and suited to your needs, you can hire with confidence and put your mind at ease.