It happens every year. Like ants at a picnic, pop-up storefronts for tax-prep firms are suddenly everywhere. The airwaves are saturated with advertisements for the latest tax software and commercials for tax pros promising fantastic returns. Even some car dealerships get in on the frenzy, promising to prepare your tax return if you'll just use your refund to purchase one of their vehicles.
With so many tax preparers, how do you know which one to choose? When you're searching for a tax preparer you can rely on, keep these four things in mind:
1. Preparer Tax Identification Number Anyone can prepare a tax return. The IRS does not have any requirements regarding qualifications, and many people choose to complete their returns themselves. However, if someone is accepting payment for tax preparation, there is one credential that is an absolute must: a preparer tax identification number.
Commercially preparing tax returns without this IRS-issued number is against the rules. If a potential tax preparer is willing to break this rule, can you trust them to prepare your return accurately? Remember, if the IRS discovers a problem with your return, you'll be the one stuck paying for it.
2. Professional Qualifications There isn't one specific qualification that signifies excellence in a tax pro, and their professional backgrounds can vary widely. Employees of big-box tax firms may simply have a few weeks training in how to complete simple returns. Bookkeepers and other financial professionals may have extensive experience but lack formal credentials.
Certified public accountants, enrolled agents, and tax attorneys typically have the greatest amount of training, so if your situation is complex, you might want to select one of these professionals. CPAs hold a college degree, have passed a rigorous exam, and are required to complete regular continuing education coursework. However, not all CPAs specialize in taxes, so you'll want to check that the professional you have in mind is willing to tackle your tax return before taking it to them. Enrolled agents have demonstrated their mastery of the tax code by either passing the IRS's Special Enrollment Exam or having spent five years working directly with taxes as an IRS employee. Tax attorneys are highly educated professionals who have passed the bar exam and chosen to specialize in complicated tax matters.
3. Accessibility Will you want to talk with your tax preparer again after your return is complete? Would discovering that you're being audited change your answer? While interactions with the IRS are mostly limited to tax season, they aren't always, so it's worth discovering whether your tax preparer will be available at other times of the year.
Why would you want to talk with your tax preparer outside of the traditional tax season? The IRS might contact you to request more information or notify you of an audit. Alternately, you might want to talk about steps you can take to reduce your tax burden, a discussion that most tax pros don't have time for during the hustle and bustle of tax time. This can be especially true if you buy a house, start a business, get married, or become a parent, because the way you handle these major life changes can affect your taxes.
4. Areas of Focus No one would mistake the tax code for light reading, so it's smart to find a tax professional who is well versed in the sections of it that apply to your particular situation. While some tax preparers handle all kinds of returns without breaking a sweat, others focus on returns for one segment of the population. Do you want someone who's a master of individual returns, a preparer who specializes in returns involving complicated financial investments, or a pro who's an old hand at business returns? For the best results, identify your needs and select a preparer who focuses on meeting them.
Geography should also influence your choice of a preparer. While the guidelines for federal tax returns remain the same, crossing state lines can shake things up for your state return. Have you moved to a different state? Do you reside in one state and have a business or property in another one? If so, things quickly become more complicated, so you'll want to make certain that your tax preparer is capable of dealing with all the ins and outs of your locale.
At tax time, finding someone to prepare your taxes isn't hard. But finding the right person to do the job is a more difficult task. Keeping these factors in mind will help you select a tax preparer you can trust.