Americans have until April 15, 2020 to file their 2019 tax returns. Because of this, it is the season of tax preparers or tax advisors. Many, however, still don’t know much about them or how to find a competent tax preparer.
According to NerdWallet, some 80% of US citizens who used tax preparers never asked about the preparer’s credentials. Two-thirds also never asked if the preparer would represent them in a tax audit. These numbers are worrying considering that hiring a tax preparer requires sharing with them important personal details like income, bank, and Social Security details. Surely, you wouldn’t want to entrust your financial future to just about anyone.
To help you out, we’ve put together a handy list of tips you can bring with you next time you look for a tax preparer.
Look for a PTIN
The IRS requires anyone who prepares or assists in preparing federal tax returns for compensation to have a valid 2020 Preparer Tax Identification Number (PTIN) before preparing returns. It added that all enrolled agents must also have a valid PTIN. A PTIN is a number issued by the IRS to paid tax return preparers. Hiring someone with a PTIN because that number must be placed in the Paid Preparer section of your tax return.
Use the IRS directory
Even the IRS warns taxpayers about going for just about anyone with a PTIN. The reason is that a PTIN is easy to get and anyone with a PTIN can start preparing tax returns. But different preparers gave different levels of knowledge and education. The IRS explained that enrolled agents, certified public accountants, and attorneys have unlimited representation rights before the IRS. This means that should you experience problems with your returns, these tax professionals may represent you on any matters involving audits, payment issues, and appeals. If you want to do it right the first time, start with the IRS directory.
Another good indicator is a tax preparer’s professional membership. According to the IRS, tax professionals belong to national organizations like the American Academy of Attorney-CPAs, American Institute of Certified Public Accountants, National Association of Enrolled Agents, and National Society of Tax Professionals, among others. Members of these groups are required to follow their group’s ethical guidelines–a reassuring quality for a tax preparer to have.
Check Fees
National Society of Accountants in 2019 said says that the average tax preparation fee was $294, which can be cheaper if deductions are not itemized. If this sounds too much for you, you can consider using a tax preparation software. You can also do it for free by using IRS Free File, provided, you know what you’re doing.
If you’re bargain hunting, you can contact different tax preparation firms and ask for their price ranges. You can expect them to charge a higher during the busiest days of the tax season like before the April filing deadline. So it’s a good idea to do shop around as early as possible.
Look Out for Red Flags
The IRS’s Circular 230 prohibits a tax practitioner from charging their clients an “unconscionable fee”. They are also not allowed to charge a fee based on the content of your tax return, for example, a fee that’s based on a percentage of your tax refund. Legitimate tax preparers often charge by the hour.
Other red flags include a tax preparer asking you to sign a blank return. Don’t ever agree to this. You should also make sure that any refund goes straight to your bank account. Avoid tax preparers that offer to deposit your refund into his or her bank account. Also keep in mind that before you sign anything, review it first and ask questions if something is unclear. Fraudulent and abusive tax preparers can be reported to the IRS.
Make Sure They’re Within Reach
Completing your filling is not the end of your duty as a taxpayer. Questions may arise from your filing and you may need the help of your preparer to address these issues. The IRS counsels taxpayers to make sure that their preparer is available. Before you sign one on, check if he or she can be contacted after the April 15 due date in the event of questions about your tax return. This is another reason to heed the IRS’s advice on only doing business with EA’s, CPA, and tax attorneys as these can represent you in front of the IRS on audits and other tax issues.
Need Professional Help with Your Tax Returns?
If you need professional help, our experienced tax professionals can guide you in the right direction. Contact us today at 818-452-2641 or fill out our contact form to schedule a free consultation.
