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Picking the perfect tax pro for your filing (and more) needs

You tried doing your own taxes last week when the 2023 filing season officially opened, with tried being the operative word.

It didn't take long to realize that you need more help. You didn't feel quite comfortable with the tax software you tried. And your tax circumstances are a bit more complex than those typically handled by the various tax preparation chains.

So now you're looking for more professional, personal tax assistance.

Be ready to wait: Good for you for admitting that your taxes are too important and confusing for you to deal with on your own. You are not alone.

Last year, the Internal Revenue Service says more than 85 million returns, or around 56 percent, of the returns it received electronically were filed by tax professionals.

Note, though, that since the current filing season is underway, you'll probably be at the end of any reputable tax preparer's client list, meaning your 1040 won't get filed until April 18 or, more likely, even later because your tax pro will file an extension for you.

But at least you're moving in the right direction. The key is to file a complete and accurate tax return, not a hastily filled out one riddled with errors that will create new and continuing tax hassles.

Here are a few tips to help you pick the perfect tax pro, starting with the answers to the following questions.

How complicated are your taxes? Basically, you need to 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 not only will file your taxes, but also devote more time to you and your tax-planning needs year-round.

Do you have special tax issues? You own your own small business is not so small anymore and has taken on more clients and employees. Your family has a trust from which you and several siblings receive income. You and your ex-spouse are still sorting out child custody issues.

All of these situations, and more, have potential tax implications, during filing season and beyond. You'll want a tax pro who is experienced in these areas. You definitely do not want your 1040 to be on-the-job training.

What's your budget? Money is a touchy subject, one that exacerbated when it comes to spending more of it to reduce what you owe the U.S. Treasury. You need to be honest with yourself about how much you're willing to spend before you get too deep into your tax help search.

The worst thing for both you and whomever you hire is continual tension during the tax season, or beyond, over charges for professional guidance and filing.

If you find a tax pro you like, but who is just too expensive for your finances, let that person know. Remember that tax pros have to make a living, but you also might be able to work out a payment plan.

Or that pro could provide a recommendation for a colleague who meets your budget and tax needs.

The many tax pro choices: You also need to understand the various levels of professional tax help. They range from literally anyone who obtains an IRS Preparer Tax Identification Number, or PTIN, and hangs out a tax service shingle to pros who've spent years in school and continuing their professional training.

Your first focus should be on the differing levels of skills, education, and expertise that popular credentialed tax professionals offer. One of the key factors for many filers is representation rights, or the ability to speak for clients on any tax matters, including audits, payment/collection issues, and appeals.

There are three credentials that provide the tax pro unlimited representation rights before the IRS. They are —

  • Enrolled Agents (EAs). These tax professionals are licensed by the IRS, which involves a suitability check and successfully completing a three-part Special Enrollment Examination. This comprehensive exam requires the EA candidate to demonstrate proficiency in federal tax planning, individual and business tax return preparation, and representation. An EA must complete 72 hours of continuing education every three years.
  • Certified Public Accountants (CPAs). These credentialed accountants are licensed by state boards of accountancy, the District of Columbia, and U.S. territories. To earn this designation, they must pass the Uniform CPA Examination. CPAs also have completed a study in accounting at a college or university, as well as met experience and good character requirements established by their respective boards of accountancy. In addition, CPAs must comply with ethical requirements and complete specified levels of continuing education in order to maintain an active CPA license. CPAs may offer a range of services. Look for a CPA who specializes in tax preparation and planning.
  • Attorneys. Lawyers are licensed by state courts, the District of Columbia, or their designees, such as the state bar. Generally, attorneys have earned a degree in law and passed a bar exam. Attorneys generally have on-going continuing education and professional character standards. These legal advisers also may offer a range of services, so look for an attorney who specializes in tax preparation and planning.

Preparers without one of the above three credentials have limited rights of practice before the IRS. They may only represent clients whose returns they prepared and signed, but only before revenue agents, customer service representatives, and similar IRS employees, including the Taxpayer Advocate Service.

They cannot represent clients whose returns they did not prepare. They cannot represent clients regarding appeals or collection issues even if they did prepare the return in question.

IRS' list of approved tax preparers: Tax return preparers with limited representation rights include those who voluntarily participate in the IRS' Annual Filing Season Program. This program recognizes the efforts of return preparers who do not obtain the credentials of attorneys, CPAs, or EAs, but who commit to tax education and filing season readiness.

The IRS issues an Annual Filing Season Program Record of Completion to return preparers who obtain a certain number of continuing education hours in preparation for a specific tax year.

You can find those preparers, as well as those with professional and state accreditations, in the IRS' public tax professionals directory. The searchable, sortable database includes the name, city, state, and Zip code of those preparers, as well as enrolled retirement plan agents and enrolled actuaries, who have valid PTINs for the current tax season.

You also can use the find-a-tax-pro search options at the American Institute of CPAs, National Association of Enrolled Agents, and National Association of Tax Professionals websites.

Checking out your tax pro: OK, things are looking good. You've decided on the type of tax professional that fits your filing and planning needs. You've found one within your price range.

But before you sign any agreement, do a bit more vetting of your choice. My earlier post, 5 things to check when hiring a tax preparer, goes into detail, but here are some highlights.

  • Inspect the pro's IRS ID. You're seen mention of a preparer's PTIN a couple of times. This ID number is required by Uncle Sam of folks who file returns for others for a fee. The digits also must be entered on any tax return the pro prepares. Note, however, that a valid PTIN is not an indicator of skill, education, or expertise.
  • Confirm credentials and complaints: The IRS' directory is a good place to start. Also check the various professional associations (like those mentioned earlier) to which they may belong. A check of your state's board of accountancy for CPAs or bar association for attorneys can let you know if the person is in good standing. Those organizations, as well as the IRS Office of Professional Responsibility for Enrolled Agents and the Better Business Bureau, also can alert you to any complaints that have been filed. If your state licenses or registers tax preparers, contact that regulatory office, too, for comments and possible complaints
  • Ask about availability, history: Obviously you want your tax pro to be around through April and if your return is extended, through the mid-October due date. But you also want some longer-term assurances. Has the solo preparer or tax firm been around for a while? Will it continue its operations months or years after filing the return? Sometimes that's the extended time frame involved in IRS questions about what's on a tax return.

Look out for these red flags: Finally, at any time during your tax professional search be on the lookout for these red flags —

  • The fee is based on your refund amount.
  • The preparer guarantees a refund.
  • The tax pro won't answer your questions.
  • The preparer doesn't want you to sign your return or asks you to sign a blank return.
  • The tax pro recommends your refund 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, stop. Then move on to the next tax pro on your interview list.

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