Choosing a Tax Preparer
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Not anyone can call himself or herself a tax preparer. Not just anyone off the street can be a tax preparer for a fee. You want to find the right one, and this individual does not have to be a certified public accountant. Although CPAs and Attorneys have passed qualifying state exams and met specific education and experience in handling accounting work, they are not always as knowledgeable in taxation as a tax preparer. This is because they do not always specialize in doing taxes like a tax preparer does. A tax preparer prepares only taxes and some accounting work that has to do with getting the records together for the ultimate goal of reporting to the IRS and the state at the end of the year. An EA is a tax preparer licensed by the IRS through a special enrollment exam. Now a tax preparer is also an individual that is registered through the IRS and must pass a special examination. Many taxpayers assume that all CPAs are 1040 experts. A CPA or an attorney is presumed to be knowledgeable and competent in preparing a 1040, but you cannot tell this by their certification alone if they are thoroughly trained, even if they have a PTIN. Not all CPA’s specialize in doing individual income tax returns, so ask them before you set up an appointment with them instead of a tax preparer.
Your best bet will probably be to find an independent tax preparer that is qualified by the IRS or the state to do tax work. There are CPA’s that do specialize in tax work. However, there’s the individual tax preparer, enrolled agent, and the tax preparer in national tax preparation chains like H&R Block, Jackson-Hewitt, and Liberty Tax Service. A tax preparer from these national tax preparation chains usually has the same qualifications as the independent tax preparer down the block. The type of tax preparer mentioned here goes through the same rigid qualifications and tax preparer education as the national chain ones. Although there are different levels of expertise, such as that of an enrolled agent, whom has passed an IRS exam, every tax preparer possesses different level of expertise. Sometimes you will be tempted to go with the title, but you should also talk to the tax preparer first and find out what are their qualifications and experience. It is a good idea to ask your potential tax preparer questions about their work. Do you have a tax preparer identification number? What are your credentials? What kind of clients do you usually work with? Can you give me a price quote? Do you provide help in case I get audited?
When choosing a tax preparer make sure the he or she has the appropriate qualifications. A good tax preparer will not only prepare your return correctly but will also save you money. There are many questions to ask a prospective tax preparer. Have you registered with the IRS, and do you have a Tax Preparer Tax Identification Number? This is probably the most important question to ask. Only a tax preparer who has registered with the IRS and a tax preparer who has received a PTIN is allowed to legally be a tax preparer for a fee. There are other certifications a tax preparer may need to have, depending on their state. What are your credentials? Tax preparers who register with the IRS and pass a test will be designated a Registered Tax Return Preparer. Tax preparers must complete a minimum of 15 hours of continuing tax preparer professional education in federal taxation each year to maintain their IRS qualification. Supposedly, if you hire a tax preparer without the proper licensing, the IRS plans to aggressively fine you.
An Enrolled Agent is not an employee or representative of the IRS; he or she is
an independent tax preparer who is “enrolled” to act as a taxpayer’s “agent” in
dealing with the Internal Revenue Service. As previously mentioned, EAs must
pass a test on federal tax topics that is composed of three parts. They also
must maintain an average of 16 hours of continuing tax education each year.
Eventually only the RTRP and EA will have proven their competence and currency
in federal tax law so choosing this kind of tax preparer may be your best bet.
What type of returns do you prepare? You usually need a tax preparer familiar with the unique tax benefits and deductions available for your trade, profession or business, and for any special activity, situation or circumstance that applies to you. A tax preparer also specializes in returns for active investors, gamblers, renters, the self-employed or members of a specific profession. Ask your co-workers or friends in same field to recommend a good tax preparer.
Find out of the training and experience of the tax preparer. For example, good answers from your tax preparer would be “I learned to be a tax preparer by filling out 1040s as an “apprentice” to a veteran tax preparer. I worked as a small business consultant and tax preparer for a prominent international CPA firm. Each year I take from 16 to 32 hours of continuing tax preparer professional education in federal and state tax topics”.
What will the tax preparer do for you in the return he or she prepared for you is questioned or audited? Will the tax preparer respond to letters of inquiry from the IRS or state tax agencies? Will the tax preparer attend the audit with you, or in your place as your representative? If the IRS or state discovers an error on the return that was the fault of the tax preparer, will he or she pay any penalty assessment? You should also find out if there will be additional fees when the tax preparer has to correspond with the IRS or state or attend an audit.
Is the tax preparer available during the year if I need help? Does the tax preparer pack up and disappear during the “normal” year, remaining unreachable until the next tax season, or will the tax preparer be around to answer any tax questions or provide tax planning advice and assistance with a financial transaction you are considering? Your tax preparer should be available to answer questions or provide tax advice at other times of the year. Be a tax preparer all year, not just in tax season. Currently it is against the tax code for the tax preparer to just disappear after tax season. The tax preparer must maintain the contact information so the tax client can contact him or her after tax season if problems do arise.
A referral from a friend or someone else you trust is usually the best way to find a tax preparer to help you with your return, but an online search or visiting the website that license the tax preparer will do. The IRS has published or will publish a list that identifies a tax preparer as qualified to do tax work. CTEC (California Tax Education Council) has a similar certified tax preparer list on their site (www.ctec.org). Besides looking for the usual qualifications of a tax preparer, you also want to look for other things. Things such as how friendly are they with their customers. Do they act like they just want to get the work out of the way and treat you like another number or are they friendly to you and make you feel welcome? Could this tax preparer be someone you can eventually be friends with and be your tax preparer for years ahead? These are also important items to consider in a tax preparer.
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Tax School]. All
Tax school page revised: 11/14/13