Whether the tax preparer you used last year will file your income tax return or you’re planning on hiring a new one, make sure to thoroughly evaluate them. There have been more changes to the tax code this year than perhaps any year in history, so having the right tax preparer is very important. Here’s what you should do to begin the process.
Verify Their Tax Credentials
When you first meet the tax preparer, look for a CPA or Enrolled Agent license in their office. If you don’t see either, then red flags should immediately go up but be sure to first ask if they have a tax or accounting license. If they don’t, then it’s not in your best interest to use them for any type of tax work. If they do, jot down their license number so that you can verify them later.
For CPA Licenses
Check the AICPA List of State Boards of Accountancy or contact the state board directly.
For Enrolled Agent Licenses
Check the National Association of Enrolled Agents or contact the IRS directly.
The databases will list the status of the licensee and if any disciplinary action has been levied against them. If you cannot find the preparers in the database, don’t be alarmed yet, first contact the state board or the IRS directly.
Check The Database Again
Even, if you are using the same tax preparer from last year, you should also check the database again as their status can change from year to year.
They Should Also Be Evaluating You
It is a bad sign if the preparer isn’t asking any of these types of questions during the meeting.
1) Who were your previous tax preparers and why are you no longer using them?
2) What type of income and expenses do you normally report?
3) Are there any previous tax liens against you?
4) How is your credit report?
5) Do you invest capital in any businesses?
6) Do you have a family with children & how many homes do you have?
7) When do you plan on retirement and what is currently included in your estate?
Just as you are evaluating the tax preparer, they should be evaluating you to reduce the risk of any issues with the tax return. So, in a way, you both should be acting as IRS agents, asking relevant questions.
Also, even if you are using a tax preparer from last year, be skeptical if they aren’t asking new tax questions this year. Your financial condition can change from year to year so they should be cognizant of this possibility since it can impact your income tax return.
Ask Who Will be Doing the Tax Work
Often times, especially at larger firms, the senior partners will have accounting staff do most of the tax work. This is okay as long as the firm has a thorough review process and the partner or senior accountant signs off on the return before it is filed. But, ask about their process and who you would be contacting if you need tax help at any time.
Ask About the Fee Structure
Most accountants charge a flat fee for an income tax return. Anywhere from $150 to $500 per return, depending on the complexity. Generally, the price tag goes up if it’s a tax return for a business.
Also, ask what the fees are for consulting type tax help since those are usually set on an hourly basis and can add up quickly.
Lastly, remember to ask your tax preparer if their fee structure changed at all from this year to last year. You have a right to know how much more they are going to charge for tax help, so ask! If they changed their fee structure ask why it has changed.
Inquire About Recent Changes in Tax Law
All tax preparers should be fairly familiar with changes to the tax code that would impact taxpayers. For instance, they should know — whether or not it is smart for you to convert a Traditional IRA to a Roth IRA, the details of the first time home buyer tax credit and other new tax credits available as a result of the American Recovery Act. If they don’t have an opinion or seem uninformed on any of these tax topics, you should probably seek tax help elsewhere.
Ask About the Types of Clients They Serve
You want to make sure that the tax preparer has tax experience with similar businesses and individuals in a similar position to yourself. Ask about the industries they serve & the complexity of the clients they serve. You want it be the right fit.
Also, if you know someone that has used this tax preparer before, you should ask them about their experience — What they liked and what they didn’t like?
This is a Starting Point
We have detailed the steps you should start with when evaluating a tax preparer. However, each situation is different, so you may need to do additional due diligence to find the right preparer for tax help.
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