J. William Seabrooke CPA P.C.

A similar article on this same subject  dated January 11, 2010 can be found on this website.  The information provided below is an update of that information and also includes new considerations. 

The selection of a tax preparer is probably one of the most important decisions that any tax payer will make. In terms of importance, it ranks on par with the choice of your family physician, your attorney,  and your financial advisors.  Although the percentages will vary by media source, generally speaking, over 80% of  American taxpayers will obtain some level of  tax return preparation assistance this year.   The existing tax laws that have emerged from the U.S. Congress in the past three decades have caused significant complications in the ability of the American taxpayer to comprehend and interpret the provisions of the tax laws that are applicable in their specific cases.  Simply stated, if you can’t understand the tax laws, don’t be concerned.  There are millions of other Americans who have reached the same conclusion.  Not only is it a formidable task for you, it’s also a challenge for tax preparers.  Remaining abreast of all of these changes/updates has become almost a full-time task for me.  In a nutshell, if you have any doubts whatsoever regarding the accuracy and completeness of your tax return, including all of the data on every line of each form,  I  recommend that you contact a tax professional for assistance.  Potential sources for this assistance include a Certified Public Accountant, a tax attorney (who usually is also a CPA), the Internal Revenue Service (http://www.irs.gov or 1-(800) 829-1040), a knowledgeable business associate, colleague, or family member, etc.

Additional factors that should be considered include, but are not limited to:

• An “Engagement Letter” -  a formal, written document that is signed by all of the parties.  This document will include many very important aspects of your relationship and  the work products that are to be provided throughout the “engagement”, especially all of the specific reponsibilities for you and for the tax preparer.  The documents will also include 1) the “scope of the engagement” (what tasks you want the preparer to accomplish and the final work products), 2) deadlines and fee structures including billings and payments, 3) communications with you (e-mail, letter, FAX etc), 4)  timing of the engagement, 5) the costs for additional services including the preparer’s terms and conditions, 6) the preparer’s practices and policies that will be provided for the protection and disclosure of your confidential tax return information.  Most malpractice insurers will not honor claims from a practitioner who does not use “engagement letters.”   
• Practitioner Tax Identification Numbers (PTIN) – in August 2010 the Internal Revenue Service implemented a new requirement that all tax preparers register with the service, obtain a PTIN, and renew their account annually.  During the annual renewal process the IRS reviews the tax preparer’s history, compliance with all of the appropriate laws, violations, suspensions, etc.  The following is an abstract from The Journal of Accountancy on this subject “All paid tax return preparers, including CPAs, now must use a PTIN when signing all tax returns, forms or claims for refund (except for certain specified returns and forms—see Notice 2011-6), and must have obtained or renewed an existing PTIN to prepare returns after Dec. 31, 2010. In addition, persons who exercise discretion or independent judgment to prepare all or substantially all of a tax return, form or claim for refund (again, apart from certain specified ones) must likewise obtain or renew a PTIN, whether or not they sign the return, form or claim for refund. The PTIN requirement is part of the IRS’ broader effort to establish minimum standards for all paid tax preparers that will eventually include, for preparers who are not CPAs, attorneys or enrolled agents, testing and continuing education.”
• Qualifications-carefully review the qualications of everyone who provdes any tax assistance to you.  This includes references, qualifications, experience, certifications, etc.
• E-file-the technology is here now.  Use it to your advantage.  You will also receive your tax refund sooner, even if you don’t use direct deposit.  Welcome to the 21st century!
• Communications and accessibility – obtain an agreement with your tax preparer during your initial meeting regarding the best method to communicate with you (Tweet, e-mail, cell phone, text message, FAX, “snail mail” etc), the best time to do so, and the responsiveness “standard” for all of your inquiries, dialogue, and communications.  A “24-48 hour turnaround” is an excellent standard to follow. In the past 32 years, one of the top complaints that new clients share with me is the failure of their tax preparer to communicate with them in a timely manner;
• Your Tax Records-all of these documents are considered to be owned by you.  Your tax preparer should make copies for his/her files and promptly return your records to you, even if there are on-going disputes between the parties;     
•  Even though you have someone else prepare your tax return, you remain fully liable for the accruracy, completeness, and timely filing  of your tax return;

 The IRS has just recently provided eight tips that are also beneficial in the decision-making process;    Here are the the IRS recommendations:

Points to Keep in Mind When Choosing A Tax Preparer 

If you pay someone to prepare your tax return, the IRS urges you to choose that preparer wisely. Taxpayers are legally responsible for what’s on their tax return even if it is prepared by someone else. So, it is important to choose carefully when hiring an individual or firm to prepare your return. Most return preparers are professional, honest and provide excellent service to their clients.

Here are a few points to keep in mind when choosing someone else to prepare your return:

1. Ask if the preparer is affiliated with a professional organization that provides its members with continuing education and resources and holds them to a code of ethics.New regulations require all paid tax return preparers including attorneys, CPAs and enrolled agents to apply for a Preparer Tax Identification Number — even if they already have one — before preparing any federal tax returns in 2011.
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 Professional Responsibility for enrolled agents.
3. Find out 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.
4. 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.
5. Provide all records and receipts needed to prepare your return. Most 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.
6. Never sign a blank return. Avoid tax preparers that ask you to sign a blank tax form.
7. 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.
8. 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.

You can report abusive tax preparers and suspected tax fraud to the IRS on Form 3949-A, Information Referral or by sending a letter to Internal Revenue Service, Fresno, CA 93888. Download Form 3949-A from http://www.irs.govor order by mail at 800-TAX-FORM (800-829-3676).          

 Links:

• Form 3949-A Information Referral (PDF 94K)
• The Office of Professional Responsibility (OPR)
• Where Do You Report Suspected Fraud Activity?