Friday, April 12, 2013

11 Clues on Finding a Tax Preparer

It’s tax season and some people procrastinate and wait until the last minute to file their taxes which makes it difficult when trying to find a reputable tax preparer or accountant. Luckily I prepare my own taxes using Turbo Tax and have done so for the past 10 years so I don’t have to worry about the cost of tax preparation fees other than the cost of the software. 

It can take quite some time to find a good tax preparer but if you wait until the last minute you are basically stuck with the company or person you selected unless you are getting a refund. 

There are all kinds of people who claim to be tax preparers and accountants. I recommend using a company or someone that is licensed to prepare taxes and registered with a state taxing board or taxing authority.  Tax preparation fees can range from $200 to $1,500 for individuals depending on the complexity of your taxes. The average cost ranges from $150 to $300. Some tax preparers charge by the hour, charge a flat fee for each form used, charge a fee based on the previous year’s fee plus additional charges for any changes, charge based on the complexity of the client’s situation, charge a flat fee for each data entry item and some charge based on a percentage of your refund. Here are 11 clues on finding a tax preparer:

  1. Expertise. When hiring a company, it is best to verify who will be preparing your taxes - an entry level, junior person or a senior person, ask about their years of experience and the type of clients they have serviced.  If a less seasoned person is preparing your taxes request that a senior person review them before filing to ensure no deductions were missed and no errors are found.
  2. Promises. Avoid hiring tax preparers who guarantee a refund or a specific amount, this information cannot be determined until your taxes are prepared. These types of individuals or companies conduct unethical or illegal practices to get large refunds, may charge additional fees and put taxpayers at risk for an audit.
  3. Expertise. If you are self-employed find a tax preparer that specializes in self-employed tax preparations. Not everyone is knowledgeable in every area and not everyone will admit that they lack that knowledge because they want to get your business.
  4. Disclosure. Ask for disclosure of all fees that can be charged.
  5. Registered. Verify the tax preparer is registered in their state and possesses a Preparer Tax Identification Number (PTIN).  Tax preparers can have different credentials.
    • Certified Public Accountants (CPAs) are licensed by state but not all CPAs are licensed to prepare tax returns. CPAs are best for individuals who may be subject to the alternative minimum tax and people who have complex situations, small business owners or real estate investors.  A CPA can also represent you in an IRS audit. You can find a CPA on the American Institute of CPAs website
    • Enrolled Agents (EA) are certified by the IRS and you can find one here 
    • Tax Attorneys. Tax Attorneys must register with the IRS and can prepare tax returns and fiduciary returns such as estate returns. Tax attorneys are best for individuals and couples who need tax preparation and strategic planning such as tax shelters or may experience any legal tax issues.  Tax attorneys can help negotiate with the IRS. Tax attorneys usually specialize in specific areas so make sure they are experienced in your particular situation.  Verify a tax attorney’s license with your local bar association in your state.
  1. Known Companies. Companies can be used such as H&R Block or Jackson Hewitt to prepare taxes. These companies may not have tax preparers who specialize in certain areas. These types of companies are best for taxpayers who have common tax deductions, homeowners and those who do not own a business or have straightforward business deductions.
  2. Connection. Find a tax preparer that you vibe with, that explains all deductions and credits you are eligible for and identifies any potential issues that may occur when filing. The best preparers are those who educate their clients about the tax process.
  3. Customer Service. Verify their level of customer service by looking up the individual or company on the Better Business Bureau (BBB) website, however not all companies or individuals are registered with the BBB.
  4. Efile. Ask if the tax preparer offers electronic filing which spends up processing time and the time to receive a refund.
  5. Contact. Ensure you have the tax preparer’s contact information including first and last name, work and cell phone number and email address if you have questions during or after the process.
  6. Guarantee. The tax preparer should guarantee the accuracy of your tax returns and offer to amend your tax return at no cost if an error is made or be willing to represent you during an audit.

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