Tips for Choosing a Tax Return Preparer
We are at the end of January, which means that time of year we all dread has come: It is tax season! The season officially began on January 20, 2015 and while many people usually don’t get around to filing until the eleventh hour, it is still a good idea to do your homework before arbitrarily picking any tax preparer off the street simply because you just need to file before April 15. Many taxpayers are unaware of the fact that even though someone else is preparing the returns, they are still legally responsible for what is on their return and any errors or miscalculations will fall on the taxpayer, not the preparer. Additionally, should you hire someone who is less competent and not up to date on the latest tax laws, they may neglect to take advantage of some of the credits and deductions you are entitled to. So a little basic research now will save you a lot of aggravation and grief (and even money) in the long run.
There are several things you should look for when hiring an individual or a firm to prepare your tax returns. Even some of the more “reputable” (i.e. advertised) larger firms constantly make errors so be sure to follow these tips regardless of any sort of inherent trust you place in a firm simply because of brand recognition.
Check the preparer’s qualifications.
Thanks to recent IRS regulations, all paid tax return preparers are required to have a Preparer Tax Identification Number, or PTIN. So be sure to ask them if they have one. Michigan, however, does not require tax preparers to be licensed. Most of the preparers who work at the bigger, more well-known firms do not have any formal training/education in tax preparation. Be sure to ask the right questions before hiring anyone. A few example questions you ask are :
- What is your experience, education, and familiarity with new tax laws? Tax laws are constantly changing and evolving. You need to be sure that the person you are entrusting your returns to is up-to-date on these changes and constantly learning, regardless of how long they have been preparing returns. Ask the preparer if they are affiliated with a professional organization and if they attend any continuing education classes (and how many hours per year they complete said classes).
- How soon will the work be completed? You need an approximate time frame so that you know that your returns will be filed in a timely fashion.
- What licensing (if any) do you have? Find out if the person preparing your taxes is a certified public accountant (CPA), an enrolled agent, a tax lawyer, etc. If you have a more complicated tax return or any tax issues, you are better off going to an individual with a higher degree of education in tax law (i.e. CPAs or attorneys who specialize in tax law would be optimal).
- Are you authorized to and will you represent me in an audit or collection matter with the IRS or the Michigan Department of Treasury should the situation come up? This question feeds off the previous one. In the unfortunate event that you may be audited or face any issues, you need someone who can represent you.
- How long have you been preparing taxes? Obviously, you want to go with someone who has been working in this field for a significant amount of time. However, make sure that even those who have been filing returns for many years stay current with all of the new tax laws that are constantly arising.
Check the preparer’s history.
Do your homework on this one! Find out if the preparer has a questionable history with the Better Business Bureau. Also 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 Enrollment for enrolled agents.
Find out about their service fees.
Ask for, at the very least, an estimate of what they will be charging you; and be sure to find out exactly how their fee is calculated. Be sure to find this information out PRIOR to them doing any sort of preparing or giving them any information that might indicate an approximate refund amount. Avoid preparers who base their fee on a percentage of your refund. Additionally, do not hire any who claim that they can obtain larger refunds than other preparers or those who “guarantee” results. Many of these preparers work on commission and will tell you anything to get your business. Also, always make sure that any refund due is sent to you or deposited into an account in your name. You will be able to see this on the return, itself. Under no circumstances should all or even part of your refund to be directly deposited into a preparer’s (or company’s) bank account.
Ask if they offer electronic filing.
This is optimal to paper returns and results in far less errors. It is also a very safe and secure filing method and has been since its debut in 1990.
- Make sure the tax preparer is accessible.Make sure that you will be able to contact your preparer while, and even after, the filing process, should any questions arise.
Provide all records and receipts needed to prepare your return.
Competent and reputable preparers will ask you for your records and receipts; they will also ask you multiple questions to determine your total income and what exemptions, deductions, expenses, etc., you qualify for. Beware of any preparer who is willing to e-file your return prior to receiving your W-2, using your last pay stub. This is a violation of IRS e-file rules. If your preparer is not asking you for any documents, receipts, or questions about your income and such, you should find someone else to prepare your returns.
Never sign a blank return.
Avoid any tax preparers who ask you to file a blank return. Also, do not sign in pencil.
Review the entirety of the return before signing it.
Once the return is completed, be sure to go through it line by line before signing it, asking any questions you may have to ensure that all the information is accurate. Do not sign it until you are certain that you understand everything and feel comfortable doing so.
Make sure the preparer signs the form and includes his or her preparer tax identification number (PTIN).
The law requires that a paid preparer must sign the return and include his or her PTIN. As stated before, although he or she signs the return, you are legally responsible for everything on the return.
Do not leave without an exact copy of the return that will be filed.
This is not something you should have to ask the preparer for; most of them will give you a copy. But in the event that they neglect to give you a copy of the return they are filing, as is, make sure you ask for one and save it someplace safe. You never know if and when you may ever need it
Tax season is a very stressful time for everyone, and it only gets more so the closer we get to the “D-Day” of tax season – April 15th. But if you follow these very simple tips and do just a little bit of homework on your part (the sooner, the better), you can diminish the stress and anxiety greatly and come springtime, you can simply sit back, relax and enjoy the warmer climate, and rest assured that your tax returns are in the right hands.