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Picking a tax pro

NOTE, Jan. 11, 2017: Although this was one of my earlier posts here at the ol' blog, the advice is still as solid today in 2017 as it was 10 years ago. I have, though,  fixed a couple of dead links and added a new one. So just buzz past the old filing stats and tax season deadlines -- here are the due dates for this year -- and head to the first heading, "How complicated are your taxes?

As noted yesterday, the IRS is now accepting e-filed returns, with more e-filing options opening up for eligible taxpayers on Tuesday with Free File's 2007 debut.

The fastest growing filing segment over the last few years has been taxpayers who use computer software to do their own taxes and e-file them. Last year, almost 20 million of us did that, up more than 18 percent over the previous filing season.

But in sheer numbers, last year's filing stats show that most e-filed returns were transmitted by tax professionals. Just over 50 million folks turned to paid tax prep pros to get the job done, a 9.4 increase over the prior year.

Natp_tax_pro_counseling2 Yes, despite the ease of doing our own taxes with TurboTax or TaxCut or TaxACT or the dozens of other software programs out there, most Americans want to have as little as possible to do with their taxes.

So they hire someone to take care of all the adding, subtracting, deducting, scheduling, multiplying and plowing through the increasingly complex tax code.

Some of those professionally prepared and e-filed taxes were done by franchise places like H&R Block or Jackson Hewitt. Others were done by independent accounting or tax prep firms. The chain outlets can pretty much take your material at any time during filing season.

If, however, you're considering taking the more personal, individualized tax prep route, you'd better get to it. A lot of tax and accounting firms stop accepting new clients early in the tax season. There is, after all, only so much work a company, especially a smaller one, can handle.

But don't be in such a hurry that you sign on with the first tax pro you run across. Careful selection is well-advised, particularly in light of problems a GAO study found last year with the work of some tax pros.

So that you don't end up with an error-riddled (or worse) professionally prepared return this filing season, here are a few things to consider.

How complicated are your taxes?
If they're relatively simple but you just don't want to be bothered, then you probably don't need, and don't need to pay for, the services of a 500-person firm where the most junior staffer gets $200 an hour to review your 1040.

Basically, determine just what level of expertise you need of someone to competently complete your paperwork. Also, decide whether you want a tax adviser or a tax preparer. If it's the former, you'll want a company or individual who can devote more time to you and your tax-filing and tax-planning needs year round.

Do you have special tax issues?
If you own your own small business or your family has a trust from which you and several siblings receive income, you want a tax pro who is experienced in these areas. You definitely do not want your 1040 to be on-the-job training.

How qualified is the preparer?
There is no national standard for a tax professional (although there is continual talk about this issue). Anyone can put out a shingle and start doing tax returns for a fee without getting an OK from Uncle Sam, although some states have established some basic requirements.

The point is, it's caveat emptor when looking for a tax pro. Here are some basic things to look for in a qualified one.

Check whether the preparer has any questionable history with the Better Business Bureau, the state’s board of accountancy for CPAs, the state’s bar association for attorneys or the IRS Office of Professional Responsibility (OPR) for enrolled agents.

Interview several firms and/or preparers and be thorough in your questioning.

Ask about education in tax and accounting issues and what licenses or certifications the person holds. Find out how long the preparer has been in practice, and how he or she keeps up with tax law changes.

A key question: Will the tax pro be available year round if you, or the IRS, have questions about your return?

Also look for these red flags:

  • The fee is based on your refund amount.
  • The preparer guarantees a refund.
  • The preparer won't answer your questions.
  • He or she doesn't want you to sign your return or asks you to sign a blank return.
  • The preparer recommends your return be sent to his or her office instead of to you or being directly deposited into your bank account.

If you encounter any of these instances, move on to the next tax pro on your interview list.

Sure, this does seem like a lot of work to go through just to get someone else to do your tax-filing work. But if you're not careful, the eventual costs could be very high.

The bottom line, literally and figuratively, is that when you sign your return, regardless of who filled it out, you and you alone (your spouse, too, on a joint 1040) are responsible for the accuracy of every item on that return.

So make sure that the person you hire to complete it is someone you feel comfortable vouching for via your signature.

More tax preparer tips: The IRS has some recommendations on choosing a tax pro here and here.

A story I wrote for Bankrate also gives a good overview of the types of tax preparers out there.

The National Association of Tax Professionals offers its advice here. You can use NATP's online search engine to find a tax pro in your area. Even the IRS wants to help you find help.

And while most tax pros are honest and ethical, every profession has its bad apples. Just ask Wesley Snipes or the clients of this former Brooklyn tax preparer. Those are just a couple of examples. Check out these government stats on tax prep fraud.

Don't forget our poll! So far it looks like Don't Mess With Taxes readers will be boosting the self-prepared with software tax return numbers this year. Are you one of them? There's still time to vote or simply check out the latest poll results there in the right column.

Photo of tax pro and client © and courtesy of National Association of Tax Professionals

Comments

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Dan

Good article. If you are having trouble finding the right tax preparer, start by asking trusted friends and family for referrals. There are also a varieity of websites, as this article mentions, to find a local tax preparer such as the CPA society, National Association of Enrolled Agents or various online directories. You can also easily conduct background checks of professionals by simply typing their name in Google, you would be suprised by the information you might find!

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