It’s that time of year again—tax season. And if you’re one of nearly 1.4 million Americans who were audited last year, you know that now is not the time to take a gamble. “Choose your preparer as carefully as you would choose your doctor or lawyer,” advises Michelle Lamishaw, spokeswoman for the Internal Revenue Service. Filing a return with inaccurate information could lead to serious consequences. Here are some tips for picking a winner so that you’ll stay out of hot water:
Select a reputable tax preparer with appropriate credentials. Ensure that this person has been in business for at least a few years, is licensed, and has a complaint-free history—which can be checked with the Better Business Bureau (www.bbb.org), the state’s board of accountancy for certified public accountants, or the state’s bar association for attorneys. There are several types of preparers: Enrolled agents are licensed by the U.S. Department of the Treasury to represent taxpayers before all administrative levels of the IRS for audits, collections, and appeals; CPAs are most often college graduates who have passed a national exam and met additional state education requirements; and tax attorneys have advanced training in tax law. Other professionals include accredited tax advisers, accredited tax preparers, and certified financial planners. “If you’re looking for someone who can represent you before the IRS in all matters including audits, collections, and the appeals process, you’ll need an attorney, a CPA, or an enrolled agent,” Lamishaw says. “Other preparers may only represent taxpayers for the audits of the returns they prepared,” she says. You can contact your state’s board of accountancy to check the status of a CPA’s license or to determine whether or not there has been disciplinary action taken against him or her. Contact the IRS Office of Professional Responsibility (202-927-3397) to check an enrolled agent’s background.
Be wary of large tax preparation chains. Although they offer convenient walk-in services, many large firms are not cost effective and often employ inexperienced tax preparers, says Cindy Hockenberry, tax information analyst for the National Association of Tax Professionals. Furthermore, once tax season is over, most large companies close their offices or reduce staff. Small firms often offer year-round services and have flexible hours. If you need help finding a tax preparer, you can search the National Association of Tax Professionals online database by zip code (www.natptax.com).
Query your prospective preparer. Ask a series of detailed questions about how long he or she has prepared taxes, the types of returns prepared, knowledge of tax law changes, the person’s education level, fees, credentials, and whether the individual has professional liability insurance. “Taxpayers are ultimately responsible for the items reported on their tax returns,” Hockenberry says. “Choosing the right tax preparer requires the same care one would use in choosing any professional.”
Know their fees up front. Don’t be shy about asking your accountant how much the tax preparation will cost. “Fees can be based on an hourly rate, by the form or schedule, or by the complexity of the return,”