By Rod Davis, BBB serving Southeast Florida and the Caribbean
For many people major life changes, business ownership, or simply a lack of knowledge about the ever-changing tax laws make finding a trustworthy tax preparer a good idea. Not all tax preparers have the same level of experience and training. Here are our tips for finding someone you can trust with your finances and sensitive personal information.
Which Type of Tax Preparer is Right for You?
First, it’s important to understand the different types of tax preparer and their qualifications. Only enrolled agents, certified public accountants, and attorneys may represent their clients to the IRS on matters such as audits, collection issues, and appeals.
- Enrolled Agent (EA): An EA is a tax preparer that has been approved by the IRS to represent taxpayers. An EA must either have prior qualifying employment with the IRS or pass an intensive two-day exam on federal taxation and complete a background check. To maintain EA status, they must complete a specified number of credit hours each year of continuing education in accounting methods and tax regulations. An EA may work independently or as part of a firm and may specialize in specific areas of tax law. An EA is a good option if you have a more complex tax situation. However, you’ll want to make sure their area of expertise applies to your personal situation. Fees and availability may vary, but you can expect an EA to charge less than a CPA. An EA is also qualified to help you with financial planning and give you tips that could help you reduce your taxes in the future.
- Certified Public Accountants (CPA): CPAs have a college degree (or the equivalent in work experience). They are licensed after passing a state professional qualifying exam. They are highly skilled in accounting. This makes them good candidates for complex tax planning and preparation if they are experienced in handling tax matters and enrolled in continuing education programs that keep them abreast of the constant changes to tax laws. If your return is quite complex, a CPA may be your best choice for tax preparation, but keep in mind they will charge more than basic tax preparers.
- Attorneys: Tax attorneys often charge the highest fees as tax preparers. For taxpayers looking to legally shelter part of their income, or for those who need specialized advice on municipal bonds, estate planning, and the like, hiring a tax attorney may be the right choice for you.
- Non-Credentialed Tax Preparers: There are about 700,000 people who work as non-credentialed tax preparers in the United States. They often work part-time or only during the tax season. These preparers must have an active preparer tax identification number (PTIN) through the IRS, but beyond that, regulating tax preparers is done at the state level. In Florida, tax preparers must pass a training course, obtain a bond, obtain a PTIN, and be registered with the state.
Most tax preparers are legitimate and competent, but it is important you conduct a thorough interview with the tax preparer before you hire them.
How to Choose the Right Tax Preparer
When it comes to choosing the right kind of tax preparer for you personally, much will depend on the complexity of your tax situation. After you’ve decided what qualifications your tax preparer needs, the following tips will help you choose someone who is trustworthy and competent:
- Review the tax preparer’s credentials. EAs, CPAs, and tax attorneys are all qualified to represent their clients to the IRS on all matters. Other preparers can help you with forms and basic matters, but cannot represent you in case of an audit.
- Be wary of spectacular promises. If a tax preparer promises you larger refunds than the competition, this is a red flag. Many such tax preparers base their fees on the amount of your return and may be likely to use shady tax preparation tactics. Some tax preparers offer “refund anticipation loans,” but in exchange for getting money up front you lose part of your return to commission fees.
- Get referrals from friends and family. One of the best ways to find a trustworthy tax preparer is to ask friends, family, or co-workers for recommendations. Once you have a few options, check www.BBB.org/SEFL. Check other consumers’ reviews, complaint details, how long the person has been providing service, and if the business is BBB Accredited. The more positive the résumé, the more likely you will have a positive experience.
- Think about availability. If the IRS finds errors in your tax forms or decides to perform an audit, will your tax preparer be available to help you with the details? Find out whether you can contact the tax preparer all year long or only during tax season.
- Ask about fees ahead of time. Before you agree to any services, read contracts carefully and understand how much the tax preparer charges. Ask about extra fees for e-filing state, federal, and local returns, as well as fees for any unexpected complications.
- If things don’t add up, find someone else. If a tax preparer can’t verify their credentials, has a record of bad reviews from previous clients, or their business practices don’t seem convincing, don’t do business with them. Keep in mind that if you hire them, this individual will handle your sensitive personal information – information you need to keep safe from corrupt or fraudulent tax preparers.
By filing early the IRS states you can lessen the chance for a scammer to scam you out of your refund!