Tax season holds significance for businesses and tax professionals alike. Since it involves gathering receipts, understanding forms, and keeping up with changing tax rules for many business owners, it’s no surprise people turn to a professional tax preparer. Doing so can save time, reduce stress, and find deductions they didn’t know existed.
However, not all tax preparers have the same skills or experience. While some are highly skilled professionals with years of experience, others may lack the knowledge or credentials to handle your taxes properly. Choosing the wrong person can lead to errors, missed savings, or trouble with the IRS.
That’s why you must do your homework before hiring someone to prepare your taxes. Knowing what to look for can save you a lot of hassle and money in the long run.
In this post, we’ll cover everything you need to consider before hiring a tax preparer.
Types of Tax Preparers
Before hiring a tax preparer, you need to understand that different types of professionals can help with your taxes. Since each comes with a distinct set of qualifications and expertise, knowing what they offer can help you choose the right one for your needs.
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Certified Public Accountants (CPAs)
CPAs are licensed professionals who specialize in accounting and tax preparation. They are well-versed in tax laws and can handle complex situations, such as tax planning for businesses or individuals with multiple income sources. A CPA might be the best choice if you need a preparer who can provide financial advice or help with audits.
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Enrolled Agents (EAs)
EAs are federally licensed tax professionals who specialize in taxation. They’re authorized to represent taxpayers before the IRS for audits, collections, and appeals. EAs undergo continuous education to stay updated on tax laws, making them a good option for those seeking focused tax expertise.
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Tax Attorneys
Tax attorneys are lawyers who specialize in tax law. They’re typically hired for legal disputes with the IRS or estate planning. While they might not be your first choice for everyday tax preparation, their expertise can be invaluable for legal and compliance matters.
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Non-Credentialed Preparers
These individuals prepare taxes without holding formal credentials like CPA or EA certifications. While some may have years of experience, others might lack the training to handle more complicated tax situations. If you consider a non-credentialed preparer, ensure they have a valid Preparer Tax Identification Number (PTIN) and check their references.
What to Look for in a Qualified Tax Preparer?
The qualifications that a tax preparer brings to the table can make all the difference. Here are a few key qualifications to keep in mind to ensure your taxes are handled with care and expertise:
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Professional Certifications
Look for credentials like CPA, EA, or Accredited Tax Preparer (ATP). These certifications indicate the preparer has undergone rigorous training and is well-versed in tax laws and regulations.
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Education and Training
A strong educational background in accounting, finance, or taxation is a good sign. Additionally, you can ask whether the preparer keeps up with continuing education to stay informed about the latest tax code changes.
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Preparer Tax Identification Number (PTIN)
Every tax preparer who charges a fee must have a valid PTIN issued by the IRS. This can be the first step in verifying their legitimacy and is non-negotiable.
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Membership in Professional Organizations
Tax preparers from organizations like the National Association of Enrolled Agents (NAEA) or the American Institute of CPAs (AICPA) are bound by strict ethical guidelines and professional standards. This can add another layer of credibility.
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Specializations
If your tax situation involves owning a business, managing investments, or dealing with international income, you need a tax preparer who specializes in those areas.
Must-Ask Questions for Choosing a Tax Preparer
Finding the right tax preparer isn’t only about their qualifications but also about understanding how they ensure they’re the right fit for your needs. You can ask the following questions before making your decision:
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What Are Your Credentials and Experience?
Are they a CPA, EA, or tax attorney? How long have they been preparing taxes? If they have experience in handling situations similar to yours, it’s a huge plus.
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How Do You Handle Errors on a Tax Return?
Mistakes happen, even with experienced tax preparers. You can ask how they address errors and whether they’ll assist you if the IRS has questions or audits your return. A responsible preparer should stand by their work and help you resolve any issues.
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What Are Your Fees?
Understanding their pricing structure upfront can save you from unpleasant surprises later. You can avoid tax preparers who base fees on the size of your refund, as this could lead to unethical practices.
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Will You Be the One Preparing My Taxes?
Sometimes, the person you meet initially may pass your case to someone else in their firm. It’s good to know who will be handling your return and their level of expertise.
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Are You Available Year-Round?
Tax season may be hectic, but tax-related questions can pop up anytime. Choosing a preparer who is available throughout the year for advice or support can be a smart move.
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How Do You Stay Updated on Tax Laws?
Tax laws change frequently, and staying current is vital. Ask how they keep their knowledge up-to-date, whether through continuing education, memberships, or certifications.
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Can You Provide References or Reviews?
A reputable preparer can easily share references or point you to reviews from past clients. Positive feedback from others can give you confidence in your choice.
Also Read: Enrolled Agents vs. CPAs: A Detailed Comparison
How to Spot a Tax Preparer You Shouldn’t Hire
While most professionals are trustworthy, some may not have your best interests in mind. You can keep an eye out for these warning signs to avoid potential pitfalls:
- Be wary of preparers who guarantee a big refund before even reviewing your financial details. Tax refunds depend on your actual income, deductions, and credits.
- Avoid preparers who charge a percentage of your refund as their fee. This practice may raise ethical concerns and encourage fraudulent claims to increase the refund amount.
- Every paid tax preparer is required by the IRS to have a valid PTIN. If a preparer doesn’t provide one or tries to operate without it, consider it a major red flag.
- Never sign a tax return that isn’t fully filled out. This could leave you vulnerable to fraud or errors that you’d be held responsible for.
- If the preparer is hard to reach or only available during tax season, think twice. You may need assistance or clarification later in the year, which is why you should choose someone who’s available year-round.
Conclusion
An experienced tax preparer can bring peace of mind, save money, and help you plan for a better financial future. Think of it as an investment in your financial well-being. Whether you’re preparing for this year’s tax season or looking ahead to long-term financial planning, having the right professional in your corner can make all the difference.
