12 Ques­tions To Ask When Choos­ing A Tax Pre­parer


I’m con­stantly asked if I can rec­om­mend the per­fect tax pre­parer. The truth is that I can’t. You’re the only one who can find the per­fect tax pre­parer for you: There’s no one size fits all. I can, how­ever, of­fer you a few tips to help you fig­ure out how to find the best tax pre­parer for you. The key, as with hir­ing any pro­fes­sional, is to ask ques­tions. Lots of ques­tions. And not just about pric­ing. Here are 12 ques­tions I rec­om­mend you ask a po­ten­tial tax pre­parer:

1. Do you have a PTIN (Pre­parer Tax Iden­ti­fi­ca­tion Num­ber)?

This should be your first ques­tion. Any­one who pre­pares fed­eral tax re­turns for com­pen­sa­tion must have a valid 2016 PTIN be­fore pre­par­ing re­turns. With­out a PTIN, a tax pre­parer is not al­lowed to pre­pare your re­turn—this isn’t some­thing you want to find out at the end.

2. What is your tax back­ground?

A slew of let­ters fol­low­ing a name on a busi­ness card doesn’t nec­es­sar­ily mean more qual­i­fied. It can mean that the per­son has passed cer­tain tests or has spe­cific tax train­ing. So ask what those let­ters mean— and how they would re­late to the prepa­ra­tion of your re­turn. Don’t be blinded by the al­pha­bet soup. Here’s a quick guide to help you sort it out in ad­vance:

• A cer­ti­fied fi­nan­cial plan­ner (CFP) is a des­ig­na­tion for fi­nan­cial plan­ners given by the Cer­ti­fied Fi­nan­cial Plan­ner Board of Stan­dards. A CFP must meet cer­tain education re­quire­ments, pass an exam, have ex­pe­ri­ence in the field, pass fit­ness stan­dards and pay a cer­ti­fi­ca­tion fee. The course­work and exam do have tax and tax plan­ning com­po­nents as de­ter­mined by the Board. A CFP may have tax ex­pe­ri­ence but tax may not nec­es­sar­ily be the fo­cus of their prac­tice.

• A cer­ti­fied pub­lic ac­coun­tants (CPA) is cer­ti­fied by the state to act as a pub­lic ac­coun­tant. All CPAs are ac­coun­tants but not all ac­coun­tants are CPAs. To qual­ify as a CPA, can­di­dates are re­quired to pass an exam. Most states also re­quire an ethics exam or course as well as con­tin­u­ing education cred­its. A CPA may spe­cial­ize in tax but not nec­es­sar­ily: There’s a wide range of CPA ser­vices in­clud­ing ac­count­ing, au­dit­ing, fi­nan­cial plan­ning, tech­nol­ogy con­sult­ing and busi­ness val­u­a­tion.

• An en­rolled agent (EA) has earned the priv­i­lege of rep­re­sent­ing tax­pay­ers be­fore by ei­ther pass­ing a three-part com­pre­hen­sive IRS test or through ex­pe­ri­ence as a for­mer IRS em­ployee. EA sta­tus is the high­est cre­den­tial the IRS awards. EAs must ad­here to eth­i­cal stan­dards and com­plete 72 hours of con­tin­u­ing education cour­ses ev­ery three years.

• AFSP (An­nual Fil­ing Sea­son Pro­gram) par­tic­i­pants are non-cre­den­tialed re­turn pre­par­ers who have met vol­un­tary re­quire­ments es­tab­lished by IRS. Those re­quire­ments in­clude 18 hours of con­tin­u­ing education (in­cludes a six-hour fed­eral tax law re­fresher course with an exam). AFSP par­tic­i­pants who have met the cri­te­ria re­ceive a Record of Com­ple­tion and are in­cluded in a pub­lic data­base of re­turn pre­par­ers on the IRS web­site.

• A JD (Ju­ris Doc­tor) is a law de­gree: Hav­ing a JD means that you’ve grad­u­ated from law school but does not al­ways mean you’ve passed the bar exam. An LLM (Mas­ter of Laws) is a se­cond law de­gree, kind of like a spe­cialty (though ethics rules in many states won’t al­low you to say that). An LLM could be fo­cused on tax­a­tion but may not be. (You could have an LLM in Trial Ad­vo­cacy, for ex­am­ple.) As with a CPA, JD can­di­dates are re­quired to pass an exam, an ethics exam or course and take con­tin­u­ing education cred­its. Hav­ing a law de­gree or two doesn’t nec­es­sar­ily mean that an at­tor­ney pre­pares re­turns or has tax ex­pe­ri­ence. (You don’t have to demon­strate com­pe­tence in tax law to pass the bar in most states.) Avoid a lawyer who prom­ises to do your taxes, get you out of that DUI and help you with your di­vorce all in the same breath.

• A Vol­un­teer In­come Tax As­sis­tance (VITA) vol­un­teer is trained by the IRS to pre­pare ba­sic re­turns.

• Other ac­coun­tants, book­keep­ers and tax pre­par­ers may be able to demon­strate com­pe­tence but may not have for­mal cre­den­tials. That doesn’t mean you shouldn’t give them a look. Ask about what they do and why they’re qual­i­fied to do it.

3. Have you pre­pared a (fill-in-the-blank) tax re­turn be­fore?

Re­mem­ber when I said there’s no one size fits all? That’s be­cause tax re­turns are not all the same. Some tax pre­par­ers can do forms 1040-EZ in their sleep. Oth­ers are flu­ent in Sched­ules C (busi­ness) and/or E (rentals). Some may fo­cus on pass-through en­ti­ties, tax-ex­empt or­ga­ni­za­tions or fidu­ciary re­turns. Tax pre­par­ers may fo­cus on in­ter­na­tional tax­pay­ers and ex­pats or small busi­nesses. There are as many vari­a­tions as there are sched­ules and forms. It’s not un­com­mon for tax pre­par­ers—es­pe­cially those that have been around for awhile—to have a pretty wide scope of knowl­edge. But no­body can do it all and don’t trust any­one who tells you oth­er­wise. If you have spe­cial cir­cum­stances be­cause of your in­vest­ments, oc­cu­pa­tion or res­i­dency sta­tus, find a tax pre­parer who has ex­pe­ri­ence with your spe­cific sit­u­a­tion.

4. Do you know the re­quire­ments of the states and lo­cal­i­ties where I am re­quired to file?

Yes, fed­eral in­come taxes know no bound­aries—those rules don’t change from one state to the next. But that’s not true when it comes to states and lo­cal­i­ties. Your state or lo­cal­ity may have quirky fil­ing re­quire­ments, es­pe­cially for busi­ness own­ers. It can get even more com­pli­cated if you’ve moved states dur­ing the year or if you live in one state and work in an­other. You may also need spe­cial guid­ance if you own a busi­ness or real es­tate in a state out­side of your res­i­dency or if you are the ben­e­fi­ciary of a trust or es­tate in an­other state. Make sure that your pre­parer knows—and can han­dle—all of those fil­ing re­quire­ments.

5. What records and other doc­u­men­ta­tion will you need from me?

While you shouldn’t be ex­pected to haul in the con­tents of your en­tire home of­fice, a rep­utable pre­parer should in­sist that you pro­vide your forms W-2, 1099,

1098 and other ver­i­fi­ca­tion of in­come and ex­penses in or­der to pre­pare a proper re­turn. You shouldn’t use a pre­parer will­ing to e-file your re­turn just by us­ing a pay stub. (That’s

against IRS rules.) A tax pre­parer should be able to ex­plain what will be needed for spe­cial sched­ules, forms or cir­cum­stances. If a pre­parer isn’t in­clined to do the nec­es­sary due dili­gence (es­pe­cially for some­thing like the Earned In­come Tax Credit) in the be­gin­ning, it should give you pause about what other cor­ners the pre­parer might be will­ing to cut later—at your ex­pense.

6. How do you de­ter­mine your fees?

Note the word­ing on this one. I didn’t say ask how much the fees would be but how the fees are de­ter­mined. Prices may vary based on the com­plex­ity of your re­turn, whether you re­quire ad­di­tional sched­ules (such as div­i­dend and in­ter­est on Sched­ule B, busi­ness in­for­ma­tion on Sched­ule C, cap­i­tal gains and losses on Sched­ule D and/or rental in­come and losses on Sched­ule E); sup­port­ing forms (such as those for the child tax credit or ad­di­tional char­i­ta­ble do­na­tion in­for­ma­tion); or whether your re­turn has out-of-the-or­di­nary line items (like Roth IRA con­ver­sions). Some pre­par­ers of­fer re­duced costs for fed­eral re­turns but add on for state and lo­cal re­turns: Make sure you un­der­stand the to­tal cost. Fi­nally, be wary of pre­par­ers who base their fee on a per­cent­age of your an­tic­i­pated re­fund: They have a fi­nan­cial in­cen­tive to en­cour­age in­ap­pro­pri­ate cred­its and de­duc­tions.

7. What about the ex­tras?

There’s noth­ing wrong with pay­ing for the ex­tras: Just make sure that you know what those might be ahead of time. When ask­ing about fees (see No. 6), be sure to ask about the cost of ex­tra ser­vices, like the cost to fix any mis­takes or to file elec­tron­i­cally. (See No. 7.) A tax pre­parer should not charge you ex­tra for a copy of your re­turn when the re­turn is pre­pared (though charg­ing you ex­tra for ad­di­tional copies may be ap­pro­pri­ate).

8. Can I file elec­tron­i­cally?

More than 1 bil­lion in­di­vid­ual tax re­turns have been pro­cessed since the de­but of elec­tronic fil­ing in 1990. It’s the fastest way to get your re­fund and tends to re­sult in fewer math er­rors. It may also be re­quired: A paid pre­parer who pre­pares and files more than 10 client re­turns must gen­er­ally file re­turns elec­tron­i­cally un­less the client opts out.

9. Who will sign my re­turn?

Re­mem­ber that your pre­parer must have a PTIN. (See again No. 1.) The PTIN and the pre­parer’s sig­na­ture need to ap­pear on your tax re­turn. Don’t trust a pre­parer who re­fuses to sign a re­turn or asks you to sign as self-pre­pared.

10. When will I re­ceive a copy of my re­turn?

It’s not un­rea­son­able to leave your pre­parer’s of­fice with­out a copy of your com­pleted re­turn; as­sem­bly may be re­quired. How­ever, you should re­ceive a com­plete copy of your re­turn within a rea­son­able amount of time fol­low­ing your ap­point­ment. If your pre­parer can’t of­fer a win­dow of time to ex­pect the copy, it might be in­dica­tive of a time man­age­ment prob­lem. If your pre­parer can’t prom­ise you a copy at all, run, don’t walk, away: You will need a copy for your own records.

11. How do I find you if I have a ques­tion or a prob­lem af­ter tax sea­son is over?

I’m not a fan of tax pre­par­ers with shops that pop up on street cor­ners dur­ing tax sea­son and then go miss­ing for half the year. Clients of­ten re­ceive re­quests from tax­ing au­thor­i­ties for ad­di­tional in­for­ma­tion in Oc­to­ber or Novem­ber: Make sure that you know how to con­tact the tax pre­parer af­ter your re­turn has been filed. If your tax pre­parer won’t be around, con­sider tak­ing your busi­ness else­where.

12. What hap­pens if I get au­dited?

No­body wants to think about an au­dit when fil­ing a re­turn. But you need to ask: Find out how the tax pre­parer han­dles au­dits or ex­am­i­na­tions from IRS. Will he or she re­spond to those ques­tions? Can the tax pre­parer rep­re­sent you in front of IRS or Tax Court? Re­mem­ber that at­tor­neys, CPAs and en­rolled agents are the only tax pro­fes­sion­als with un­lim­ited rep­re­sen­ta­tion rights, mean­ing they can rep­re­sent their clients on any mat­ters in­clud­ing au­dits, pay­ment/col­lec­tion is­sues and ap­peals in front of the IRS. AFSP par­tic­i­pants have lim­ited rep­re­sen­ta­tion rights, mean­ing they can rep­re­sent clients whose re­turns they pre­pared and signed, but only be­fore rev­enue agents, cus­tomer ser­vice rep­re­sen­ta­tives and sim­i­lar IRS em­ploy­ees, in­clud­ing the Tax­payer Ad­vo­cate Ser­vice. For 2016, PTIN hold­ers with­out an An­nual Fil­ing Sea­son Pro­gram – Record of Com­ple­tion or other pro­fes­sional cre­den­tial are only per­mit­ted to pre­pare tax re­turns. That doesn’t have to be a deal breaker (there are pro­fes­sion­als who fo­cus on au­dits if you need to hire some­one later) but you should un­der­stand

the scope of ser­vices and rep­re­sen­ta­tion be­fore you agree to be­come a client.

Yes, it’s a long list. But don’t feel self-con­scious about ask­ing: Most of th­ese ques­tions re­quire pretty sim­ple an­swers. Choos­ing a good tax pre­parer does re­quire a lit­tle bit of re­search and ef­fort on your part but it’s worth it. And ad­mit it: You asked at least th­ese many ques­tions when find­ing a hair­dresser or a pe­di­a­tri­cian. Just as you wouldn’t dream of go­ing to a dif­fer­ent doc­tor ev­ery year or skip­ping from one auto me­chanic to the next, you’re look­ing for con­stancy. The goal of hir­ing a tax pre­parer isn’t to find some­one who can merely fill out a form this year but to es­tab­lish a pro­fes­sional re­la­tion­ship. A good tax pre­parer wants that, too, and won’t mind an­swer­ing your ques­tions.

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