When you begin searching for a tax preparer, you encounter a wide range of choices. There is no one right choice for everyone; the right choice for you will depend a great deal upon your individual preferences and tax needs. The only way to find the best fit is to ask questions. The following questions can help you learn more about the tax preparers you are considering and decide which is the best fit for you.
1. What is your educational and professional background?
Do you have a PTIN?
In order to professional prepare any tax return, the IRS requires, at minimum, a valid preparer tax identification number (PTIN). A PTIN alone, however, is not an indication of competence. Although the IRS established regulations that required holders of PTINs to pass a certification test and complete continuing education courses, the Court of Appeals for the D.C. Circuit recently upheld a decision holding that the IRS lacks the legal authority to regulate tax return preparers in this way. The PTIN is still a legal requirement, so you should never hire a preparer without one, but you must dig deeper to determine professional qualifications.
Do you have any professional designations?
There is a range of professional designations that a tax return preparer might hold. Some information about each will help you determine what type of professional is best suited to your needs and preferences.
- Volunteer Income Tax Assistance (VITA) or Tax Counseling for the Elderly (TCE) Volunteers
Some taxpayers are eligible for free help filing their taxes. Volunteers with these programs do not have to be tax professionals, but they do receive some training from the IRS. These programs are available to elderly or low-to moderate-income taxpayers.
- Enrolled Agents (EAs)
Enrolled Agents are licensed by the IRS, which requires them to pass exams and take continuing education in tax preparation, tax planning, and IRS representation. They are also subject to credit history and criminal background checks.
- Certified Financial Planners (CFPs)
Certified financial planners are regulated by the Certified Financial Planner Board of Standards, which requires education, testing, experience, and background checks. Their coursework and exams include tax components, but tax may or may not be a focus of a CFP’s practice. If you are considering a CFP, ask specific questions about the planner’s specific education and experience in tax preparation.
- Certified Public Accountants (CPAs)
CPAs are licensed by the state and must pass more stringent education and testing requirements than EAs. Iowa CPAs may offer a wide range of financial services, including tax preparation, tax planning, and IRS representation. Not all CPAs specialize in tax, so it is wise to ask CPAs you are considering for your tax preparation about their specific tax experience.
- Tax Attorneys
Tax attorneys are members of the state bar who specialize in tax law. As attorneys, they tend to charge higher rates than other professionals. They are valuable resources for taxpayers who have complex tax issues that require detailed legal analysis. Most individuals and small business do not need a tax attorney’s degree of specialized knowledge and skill.
2. What is your experience with my type of return?
Individual tax returns vary widely in their details and level of complexity. Various preparers have more experience with Schedules C (for business), Schedules E (for rental property), with tax-exempt organizations, with returns reporting foreign or investment income, or income from different states, for example. Describe what type of return you will need to file, and ask what experience the preparer has with the forms that will be included.
3. How do you determine your fees?
Exclude from your list any preparers who base their fees on a percentage of your refund. This type of fee basis gives them a financial incentive to inflate credits and deductions, which can put you in serious trouble with the IRS. Remember that even when you hire a professional to prepare your taxes, you are ultimately responsible for the contents of your return. Fees are typically charged based on the complexity of your return and the which forms must be filed.
4. What happens if the IRS questions or audits my return?
Only certain types of preparers, including EAs, tax attorneys, and CPAs, are allowed to represent taxpayers before the IRS. Even so, other types of professionals can provide assistance in following up with IRS questions or advising you through an audit. Beware of any tax preparation business that only operates seasonally, as they are unlikely to be available to help you sort out any issues that arise after you file.
According to Consumer Reports, the best tax return preparer for you is one who has a detailed understanding of your particular financial situation and can minimize your tax liability. Boelman Shaw Capital Partners offers our clients full-spectrum tax and financial planning services. This breadth of service allows us to create the intricate understanding of your financial picture that puts us in the best position to help you get the most out of your money, from this year’s filing to tax-savvy savings and investment planning.
Material discussed herein is meant for general illustration and/or informational purposes only. Because individual situations will vary, the information shared here should be used in conjunction with individual professional advice.