About a third of us hire tax preparers or tax advisors to file our tax returns, according to one of the surveys a few years ago, but hardly any of us know much about them — or how to find the best tax preparer. A full 80% of people who used tax preparers never asked about the preparer’s credentials, according to the survey, and about 75% never asked if the preparer would represent them in a tax audit. That’s amazing, considering that hiring a tax preparer or tax advisor means sharing details about everything from your income to your bank accounts, your marriage, your kids — and your Social Security number. So if you’re searching for help, here are seven tips on how to find the best tax preparer or tax advisor for you.
1. Ask for a Preparer Tax Identification Number (PTIN)
The IRS requires anyone who prepares or assists in preparing federal tax returns for compensation to have a PTIN. Note the phrase “for compensation” — volunteer tax preparers don’t need PTINs. Make sure your income tax preparer puts his or her PTIN number on your return — the IRS requires that, too.
2. Require a CPA, law license or Enrolled Agent designation
A PTIN is relatively easy to get, so go a step further and get a credentialed preparer — someone who’s also a certified public accountant (CPA), licensed attorney, enrolled agent (EA) or who has completed the IRS’ Annual Filing Season program. The Accredited Business Accountant/Advisor and Accredited Tax Preparer are examples of programs that help preparers fulfil the Annual Filing Season Program requirement. These credentials all require varying amounts of study, exams and ongoing education.
How do you find the best tax preparer near you with the credentials you want? One way is to search the IRS’ directory. It includes preparers with PTINs and IRS-recognized professional credentials. Volunteer preparers and preparers with just PTINs won’t be in the database.
3. Look for friends in high places
Membership in a professional organization such as the National Association of Tax Professionals, the National Association of Enrolled Agents, the American Institute of Certified Public Accountants, or the American Academy of Attorney CPAs is always a good thing to have in a tax advisor, as most have codes of ethics, professional conduct requirements and various certification programs.
4. Compare fees
How much do tax preparers charge? The average fee for preparing a Form 1040 is $203, and tax preparers who don’t use a flat rate typically charge $138 per hour, according to the National Society of Tax Professionals. Often, tax preparers either charge a minimum fee plus cost based on the complexity of your return (that minimum fee ranges from $160 to $172 on average), or they charge a set fee for each form and schedule needed in your return (filing a Schedule C might cost an extra $84 on average, for example). If you come across a tax preparer whose fee is based on the size of your refund or who says he or she can get you a bigger refund than the next guy, that’s a red flag.
5. Reconsider tax advisors who don’t e-file
The IRS requires any paid preparer who does more than 10 returns for clients to file electronically via the IRS’ e-file system. If your tax preparer doesn’t offer an e-file, it may be a sign the person isn’t doing as much tax prep as you thought.
6. Confirm they’ll sign on the dotted line
The law requires paid preparers to sign their clients’ returns and provide their PTINs. Never sign a blank tax return — the preparer could put anything on the return, including their own bank account number so they can steal your refund.
7. Check if they’d have your back
Enrolled agents, CPAs and attorneys with PTINs can represent you in front of the IRS on audits, payments and collection issues, and appeals. Preparers who just have PTINs can’t — even if they prepared your return. Preparers who complete the Annual Filing Season Program can represent clients only in limited circumstances.
Availability is also crucial. Even after the filing season is over and your tax return is history, the best tax preparers will take your call, respond to your email, or welcome you for a visit.