When you hire a tax preparer, you expect him or her to be a skilled professional in tax preparation and to accurately file your income tax return. You are trusting your most personal information to them. They know about your marriage, your income, your children and your social security numbers, as well as all the details of your financial life. In addition to that, you are responsible for accuracy of the information on your income tax return regardless of who prepares the return for you. It is important to understand the different types of tax preparers so you can choose the right one for you. The Internal Revenue Service (IRS) suggests that you consider the following things as you seek the right tax preparer for your needs.
The IRS explains that the main difference in the types of tax preparers are the “representation rights” they have on your behalf.
Unlimited representation tax return preparers include:
Certified Public Accountants
- Licensed by state boards of accountancy
- Completed study in accounting at a college or university and passed the CPA Examination
- Meet good character and ethical requirements
- Complete continuing education to maintain a CPA license
- Some CPAs specialize in tax preparation and planning
Attorneys
- Earned a degree in law and passed a bar exam
- Licensed by state courts
- Complete continuing education
- Maintain professional character standards
- Offer a range of services, some specialize in tax preparation and planning
Enrolled Agents
- Licensed by the IRS
- Passed the IRS Special Enrollment Examination
- Subject to suitability check
- Complete continuing education to maintain EA license
Other preparers have limited practice rights with the IRS. They cannot represent clients whose returns they did not prepare and they cannot represent clients regarding appeals or collection issues.
Limited representation tax return preparers include:
Annual Filing Season Program Participants
- Program participants are not attorneys, CPAs or enrolled agents
- Ready for filing season
- Obtain education hours for a specific tax year
Tax preparers with no representation rights:
PTIN Holders
- Have an active preparer tax identification number
- Have no professional credentials
- Do not participate in the Annual Filing Season Program
- Are authorized to prepare tax returns
According to the Internal Revenue Service (IRS), anyone can be a paid tax return preparer as long as they have an IRS Preparer Tax Identification Number (PTIN).
How to decide if a Tax Preparer is right for you:
Check their qualifications
The IRS Directory of Federal Tax Return Preparers with Credentials and Select Qualifications helps taxpayers find a tax return preparer with specific qualifications.
Check the preparer's history
- Ask your local Better Business Bureau about the preparer
- Check for disciplinary actions reported about the preparer
- Look at the license status for credentialed preparers
Ask about service fees
- Avoid tax return preparers who base fees on the size of the refund
- Be careful of preparers who boast bigger refunds than their competition
Ask to e-file
- Avoid paper and mailing delays
- Ask your preparer to file electronically and choose direct deposit
Make sure the preparer is available
Shortly after the filing deadline, you may want to contact a tax return preparer to ask about the coming year.
Provide records and receipts
- Good preparers ask to see your records and receipts
- Reputable preparers ask questions about total income, tax deductions and credits
Never sign a blank return
Never use a tax return preparer who asks you to sign a blank tax form without the amounts included.
Review before signing
- Review your tax return before signing it
- Ask questions if something is not clear about the return
- Feel comfortable with the accuracy of your return before you sign it
Review details about any refund
Confirm the correct routing and bank account number on your completed return if you're requesting direct deposit.
Ensure the preparer signs the return and includes their PTIN
- All paid tax return preparers must have a Preparer Tax Identification (PTIN) number
- By law, paid preparers must sign your returns and include their PTIN
- Your copy of the return is not required to have the PTIN on it
Once your taxes are filed
- Be sure to ask your tax preparer for a copy if they do not provide you with one
- Keep a copy of the return and supporting documentation for your records (IRS recommends keeping 3 years from the date you filed your original return)
- Beware of “Ghost” tax preparers
- Avoid “Ghost” preparers who refuse to sign the tax returns they prepare
- Prepare the return, print it, get you to sign and mail it without a PTIN included
- Prepare but refuse to digitally sign it as the paid preparer.
- Be careful of Unscrupulous tax return preparers:
- May require cash only and not provide a receipt
- Invent income to qualify their clients for tax credits
- Claim fake deductions to boost the size of the refund
- May direct refunds into their bank account, not the taxpayer's account
Report abusive tax preparers to the IRS
Most tax return preparers are honest and provide great service to their clients. However, some preparers are dishonest. People can report abusive tax preparers and suspected tax fraud to the IRS. Use Form 14157, Complaint: Tax Return PreparerPDF.
Care is There offers Daily Money Managers to assist you with making sure that bills and paperwork are submitted on time. Daily Money Managers are available to help you find the right tax preparer to meet your needs.
How Care is There can help:
- Help you determine if you need to hire a tax preparer
- Locate and hire the right tax preparer for you
- Secure necessary paperwork and getting it to the tax preparer
- Report abusive tax preparers
- Prepare for tax season with Care is There’s Daily Money Managers
Next Steps
Contact Care is There today for a free consultation!
Central Virginia: 434.326.5323
Shenandoah Valley: 540.246.0211
Toll Free: 800.434.1633
Email: Info@CareisThere.com