According to founding father, prolific inventor and famous kite flyer, Benjamin Franklin, “In this world nothing can be said to be certain, except death and taxes.” He did manage to get his face on the $100 bill so I think it is safe to say he knew what he was talking about. While this is a very unpleasant truth, it is a necessary one. Aaaaand seeing as how it is everyone’s most favorite time of year, tax season – YAAAY (said no one ever) – we thought we would help alleviate some of the stress by offering up some tips on how to find a good tax preparer.
Determine whether or not you really even need a tax preparer
While no two taxpayers have identical tax situations, several million of them are really rather straight-forward and can be done at home. If your tax situation happens to fall into that category, you may want to consider doing them yourself on a gloomy Sunday or perhaps during a bitter-cold snowstorm when you have some free time. It would certainly save you some valuable time (time wasted looking for a trustworthy and knowledgeable preparer) and money to simply purchase tax software such as TurboTax and just get your hands dirty (just a figure of speech – we aren’t condoning any sort of shady tax stuff).
However, I offer this first piece of advice with caution and with a rather large asterisk. One should not get too cocky when it comes to filing their own taxes. DIY tax preparation applies for those with the most basic tax situations – W-2 forms from work, mortgage interest and basic/obvious tax deductions. Anything beyond that, or if you start getting tangled up in technicalities or gray areas and the murkier areas of the tax code, you definitely need to consult a pro. After all, it was Albert Einstein – another historic and brilliant mind – who once said “The hardest thing in the world to understand is the Income Tax.” True story Al. True story.
With that in mind….
Be picky about who does your taxes
The problem with the tax industry is that it is so overly saturated with major corporations who shell out big bucks for advertising (we won’t name names but one of them rhymes with H&R Schmock *wink*) – that people simply assume that those companies must be the best. Nope. This is a common mistake and is what is known as “brand recognition”. While those companies are not the worst, they are furthest from being the most trained or most knowledgeable professionals to handle anyone’s taxes.
When it comes to qualified tax professionals, it works like this: we have tax attorneys at the very top; then comes certified public accountants (CPAs); enrolled agents come next; and then just a general pool of preparers. Unfortunately, this is a very unregulated field.
Tax attorneys, and enrolled agents both specialize in or have passed exams on tax rules, as have CPAs. At the very least, you want someone who has a Preparer Identification Number, or PTIN from the IRS. Do not assume that the people working at those massively marketed companies mentioned earlier are attorneys, CPAs or even enrolled agents. Also, you cannot always assume that someone is using a valid PTIN or one that belongs to them as was discovered in 2014 by the Government Accountability Office. You can verify PTINs and professional credentials on the IRS website.
Be on the lookout for any shady behavior
I cannot stress enough how prevalent fraud can be in this business, but don’t let that scare you away from pursuing a good, well-versed and of course, legitimate, tax professional that will help you with your taxes. They are definitely out there, but you should keep your guard up and know what to lookout for.
First off, when meeting with the preparer, ask them their fees up front. If they tell you that they take a percentage of your refund, run for the hills. This is NOT typical industry practice, contrary to what they may try and tell you. Industry standard decrees that they take a flat fee or that they charge you an hourly rate. That’s all. Anything else and they are trying to swindle you.
We have all heard the sage-old expression “If it seems too good to be true, then it probably is”. So if a tax preparer promises that they can get you a larger refund than any other tax-prep company, they are either lying to you or looking to pull something underhanded to make that statement true. Either way, you don’t want any part of that. After all, you are responsible for everything that goes on your returns regardless of who prepared it and you will be held accountable for anything sketchy.
In a similar vein, if the tax professional promises that they can deliver a certain dollar amount regarding your tax refund, ask them to whip out their crystal ball and give you tomorrow’s lottery numbers too, because that’s not a thing.
When signing your tax return, make sure that the preparer’s PTIN is on your tax returns before signing, and make sure it does not say “self-prepared.” Also, never sign a blank return and never direct your refund to a bank account that is not yours.
Any preparer worth his or her salt will do their due diligence and ask for last year’s returns. If they neglect to do so they could be asleep at the switch and missing key items that need to be reported on your tax return; missing these items can cause you to miss out on some major deductions/credits or even land you in hot water with the IRS.
This one seems pretty obvious but we will say it anyway: your tax preparer should provide a secure portal for sending information. You are dealing with very sensitive, confidential information and it is of the utmost importance that you treat it as such. If you have a preparer who, let’s say, requests that you email them a copy of your driver’s license, you should definitely be wary. No amount of skepticism or caution is too much when it comes to protecting your identity.
Don’t let the bad apples go Scot-free
If you happen to find yourself in a situation where you have been wronged, or even defrauded by a preparer, it is imperative that you take action. Do not just move on to someone else and let this person get away unscathed. There are a few options available to you.
One option is to file a complaint with the IRS by filling out Form 14157 and send it in along with any supporting documents. You can also alert the National Association of Enrolled Agents, the National Association of Tax Professionals, and other professional groups which might in turn spark an internal investigation if said preparer is a member of the group.
Unfortunately, getting restitution may be harder. According to Council of Better Business Bureaus data, the national average for customer complaints being resolved across all industries in 2015 was 79%. For complaints against tax preparers, that number dropped down to 66%. Just to give you some perspective on this, the cellular industry and banks usually boast numbers of about 98% and 97% resolution rates.
According to Better Business Bureau spokesperson, Katherine Hutt, “most of the time, when people are unhappy with a service like that, it’s because they didn’t check out the company ahead of time. Their complaints are usually the same thing previous customers have complained about,” she says of complaints filed against tax preparers. So be sure to do some basic research on someone before entrusting them to handle your taxes.
If a tax preparer has stolen from you, call the police and file a complaint with the IRS. If they have stolen your identity, you should certainly turn them in to the IRS Office of Professional Responsibility. Chances are, if they have stolen your identity, they have probably stolen others’.
Even the best tax preparers make honest mistakes from time to time and the good ones will usually pay your penalties, though any extra taxes will likely fall to you.