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More than 60% of Americans pay someone to prepare their tax returns, and with good reason. It's a complicated, time-consuming, sometimes messy task, and there's not a lot of room for error.
But finding a competent preparer can be unnerving. Currently, anyone can prepare tax returns for a fee — and a lot of people do. Some are reputable professionals. Others use the lure of low-cost tax preparation to promote dubious products. And still others are flat-out crooks.
Last year, the IRS announced plans to require all paid tax preparers to register with the government, pass a basic competency test and take continuing education courses. Starting this year, anyone who prepares tax returns for a fee will be required to obtain a Preparer Tax Identification Number from the IRS, so make sure the person who prepares your return has fulfilled that requirement.
Other tips for choosing a tax preparer before the April 18 filing deadline:
Avoid big talkers. Beware preparers who claim they'll get you a bigger refund than their competitors can. A preparer can't estimate your refund without reviewing your financial information. And don't do business with anyone who bases his fee on a percentage of your refund. "That's illegal," says Cindy Hockenberry of the National Association of Tax Professionals.
Likewise, steer clear of anyone who won't discuss fees in advance, says Edward Karl, vice president of taxation for the American Institute of Certified Public Accountants. Some preparers may not be able to provide an exact amount until they see your return, but they should be able to give a range or explain how fees are calculated.
You'll need receipts. Avoid preparers who say they don't need to see receipts to estimate your charitable contributions or other deductions. "You need to have a receipt for every single dollar you contribute," Hockenberry says. "If the preparer doesn't ask good questions, you might want to gather your belongings and see someone else."
Check credentials. Certified public accountants, enrolled agents and attorneys are required to fulfill education and licensing requirements and are bound by ethical standards. They're also authorized to represent taxpayers before the IRS in all matters, including audits, collections and appeals. That doesn't mean you should automatically rule out a preparer who doesn't hold one of these designations, Hockenberry says. Find out how long the preparer has been preparing tax returns and whether he or she belongs to a professional organization that has continuing education requirements. And don't be afraid to ask for references, Karl says.
Look for stability. Make sure the preparer will be around after April. If the IRS has questions about your return, you'll want to be able to get in touch with him or her.
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