Important Facts to Consider BEFORE You Choose A Tax Preparer

The exclusive purpose for the information which is provided from this website is to disseminate  information, and not to provide tax advice.

Based on your own personal experiences or the experiences of those whom you know, everyone who is reading this article will have a different opinion on its importance and relevance.  I would like to stipulate that its importance is much higher today than it was three to five years ago but not as high as it will be three to five years from now.  There are several key factors which support this statement:

  1. The budget deficit for our Nation is at a record high level, at an amount so large that is historically unprecedented;
  2. To partially drive down this deficit to levels considered acceptable by the electorate, there is an urgent need for tax revenues, the greatest majority of which are provided by individual taxpayers;
  3. Advances in technology are providing the taxing authorities with greater opportunities to identify and collect  this revenue;
  4. The complexity of the existing tax laws has tended to increase over time which has simultaneously increased the challenges for all taxpayers in understanding the myriad of tax laws, interpreting them correctly, and filing accurate income tax returns;
  5. Not only are the current accuracy standards for taxpayers and tax return preparers at an all-time high, but they are expected to continue to increase throughout the foreseeable future.

Presently, you have two options: 1) prepare all of your tax returns yourself, or 2) engage the professional services of someone else to prepare your tax returns for you.  This is an extremely important decision.  Regardless of your decision, you remain legally and financially responsible for all of your tax return information and data.  In January 2011 I published two closely related articles on this subject at this website:

Clicking on the above hyperlinks will permit you to access either or both articles.  There is additional, relevant information for you in this article today.  However naive it may have been at the time, as a very young CPA I assumed (??) that all, or even most,  CPAs within my profession continuously strive to achieve, maintain, and uphold the highest standards for their integrity, technical knowledge, client communications, and client satisfaction.  My own actual experiences have demonstrated to me that this assumption is not always correct.  If you choose to engage the services of either a tax preparer, CPA, or tax attorney, I am recommending that you consider all of the information in all of these articles in your decision-making process, and that you continuously evaluate your tax professional throughout every aspect of your tax engagement.  If there is ever an instance of dissatisfaction, immediately inform the tax professional, or obtain the services of another tax practitioner.

Additional “qualitative factors” which you should use in making your decision, include, but are not limited to:

  1. Open Cummunications -  are you always accorded dignity and respect by your tax professional? Is there continuous dialogue between both of you?  Are you always kept abreast of the important aspects of your tax returns and tax situation, including the key provisions of pending and new tax laws?  Does your tax professional communicate with you in terms and concepts which you easily understand and for which you can subsequently conclude yourself is the best or most appropriate response?  Does your tax professional continuously discuss with you opportunities to reduce your tax liability?  Does she or he explain opportunities for you to benefit from existing or anticipated changes in the tax laws?
  2. Responsiveness –   does your tax professional always promptly respond to your inquiries, questions, and concerns especially correspondence which you receive from any taxing authority?
  3. Accessibility – is your tax professional always reasonably accessible to you following a telephone call, e-mail, written correspondence, etc?
  4. Engagement Letter – does your tax professional provide you with a document, which is easily understandable by both of you, which sets forth all of yours and his or her responsibilities, including important provisions, tasks, dates, deadlines, fees and costs, etc?  Is it signed and dated by all parties?
  5. Documentation –  does your tax professional respond to all of your questions regarding the data and information in your tax returns with an explanation of all supporting statements and schedules, if needed by you?  Are you provided with a complete hard or soft “as filed” copy of your tax returns for your records?  Are ALL of your original tax records returned to you?  If you are a business owner, does your tax professional provide you with an explanation between the amount in your financial statements (Balance Sheet, Profit and Loss, General Ledger etc) and the data submitted in your tax return?  Does the tax professional provide you with all of the required accounting adjusting entries that are required for your business?  Is the fee for his or her services appropriate under the circumstances and acceptable to you, including the fee payment schedule?
  6. Warranty – your tax preparer or tax professional should always stand behind (warrant) the accuracy and completeness of the tax returns which he or she prepares for you.  If the taxing authorities subsequently determine that there are errors or defects, unless it is due to misttatements of fact on your part, there should not be any additional costs to you for the preparation and filing of amended tax returns.  If there is a stipulation to the contrary, it should be clearly set forth and stated in the “Engagement Letter” which is described above.

There is addtional information on this subject from the Internal Revenue Service: 

Ten Tips to Help You Choose a Tax Preparer 

Many people look for help from professionals when it’s time to file their tax return. If you use a paid tax preparer to file your return this year, the IRS urges you to choose that preparer wisely. Even if a return is prepared by someone else, the taxpayer is legally responsible for what’s on it. So, it’s very important to choose your tax preparer carefully.

This year, the IRS wants to remind taxpayers to use a preparer who will sign the returns they prepare and enter their required Preparer Tax Identification Number (PTIN).

Here are ten tips to keep in mind when choosing a tax return preparer:

1. Check the preparer’s qualifications. New regulations require all paid tax return preparers to have a Preparer Tax Identification Number. In addition to making sure they have a PTIN, ask if the preparer is affiliated with a professional organization and attends continuing education classes. The IRS is also phasing in a new test requirement to make sure those who are not an enrolled agent, CPA, or attorney have met minimal competency requirements. Those subject to the test will become a Registered Tax Return Preparer once they pass it.

2. Check on the preparer’s history. Check to see if the preparer has a questionable history with the Better Business Bureau and check for any disciplinary actions and licensure status through the state boards of accountancy for certified public accountants; the state bar associations for attorneys; and the IRS Office of Enrollment for enrolled agents.

3. Ask about their service fees. Avoid preparers who base their fee on a percentage of your refund or those who claim they can obtain larger refunds than other preparers.  Also, always make sure any refund due is sent to you or deposited into an account in your name.  Under no circumstances should all or part of your refund be directly deposited into a preparer’s bank account.

4. Ask if they offer electronic filing.  Any paid preparer who prepares and files more than 10 returns for clients must file the returns electronically, unless the client opts to file a paper return.  More than 1 billion individual tax returns have been safely and securely processed since the debut of electronic filing in 1990.  Make sure your preparer offers IRS e-file.

5. Make sure the tax preparer is accessible.  Make sure you will be able to contact the tax preparer after the return has been filed, even after the April due date, in case questions arise.

6. Provide all records and receipts needed to prepare your return. Reputable preparers will request to see your records and receipts and will ask you multiple questions to determine your total income and your qualifications for expenses, deductions and other items. Do not use a preparer who is willing to electronically file your return before you receive your Form W-2 using your last pay stub. This is against IRS e-file rules.

7. Never sign a blank return. Avoid tax preparers that ask you to sign a blank tax form.

8. Review the entire return before signing it.  Before you sign your tax return, review it and ask questions. Make sure you understand everything and are comfortable with the accuracy of the return before you sign it.

9. Make sure the preparer signs the form and includes their PTIN.  A paid preparer must sign the return and include their PTIN as required by law. Although the preparer signs the return, you are responsible for the accuracy of every item on your return.  The preparer must also give you a copy of the return.

10. Report abusive tax preparers to the IRS. You can report abusive tax preparers and suspected tax fraud to the IRS on Form 14157, Complaint: Tax Return Preparer. Download Form 14157 from www.irs.gov or order by mail at 800-TAX-FORM (800-829-3676).

Links:

Videos:

Choosing a Tax Preparer – English | ASL 

 

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Posted by Bill Seabrooke

One Response to “Important Facts to Consider BEFORE You Choose A Tax Preparer”

  1. Thanks for your posting about this information and I found it extremely helpful with my case that is still pending with my lawyer. I found it and it was very helpful and helped with a lot of facts. Great and appreciated! Keep up the great work in the future on this.

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