If you don’t have hours to spend filling out your own tax forms, if you have a complicated tax situation or if you just don’t know where to begin, you’ll probably need to hire a tax preparer this year. But don’t fork over your hard-earned money to just anyone. Ask these questions first so you can find a champ and not be a chump.
1. ‘Do you have a PTIN?’
What you’re looking for: Imposters
If the answer is no, walk away, says Cindy Hockenberry, the director of tax research and government relations at the National Association of Tax Professionals.
A preparer tax identification number (PTIN) is issued by the IRS, and “all preparers that prepare returns for compensation are required by law to have one,” she says.
Don’t be offended if a preparer won’t share his or her PTIN number or redacts it on your copy of your return. It may be a defensive move to protect against criminals who steal PTINs. To be certain, you can look up the preparer on the IRS’ PTIN directory, Hockenberry says.
2. ‘What do the letters after your name mean?’
What you’re looking for: Competence
Formal training and education aren’t required to prepare tax returns; getting that PTIN might have taken just 15 minutes online. But good preparers have it anyway, says Trish Evenstad, president of the Wisconsin Society of Enrolled Agents. Acceptable credentials include enrolled agent (EA), attorney, certified public accountant (CPA), or current completion of the IRS’ Annual Filing Season Program (AFSP), she says.
Also ask whether the preparer belongs to a professional association, then verify the person’s membership with the association, Hockenberry says. You can often do that quickly and easily on association websites. Many of these groups require members to adhere to a code of ethics and standards of practice.
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3. ‘How long have you been at this location?’
What you’re looking for: Fly-by-night operations
It’s normal for a tax preparer to move to a bigger or better office once in a while, but watch out for preparers who move a lot, Hockenberry says.
“Preparers that are looking to be scammers usually hop around. They milk an area and then they go to another state,” she says. Check your local chamber of commerce and Better Business Bureau websites for complaints.
4. ‘Where should I have my refund deposited?’
What you’re looking for: Thieves
This is a trick question, so use your poker face. If the preparer wants you to have the IRS deposit your tax refund in an account the preparer controls, that’s a red flag.
“If they’re saying, ‘Oh, well, I’ll get you your refund and give it to you,’ that’s a huge no-no,” Evenstad says. “It should always go into your bank account. It should never go into anybody else’s bank account.”
“If they say, ‘Well, we have a bank account set up where you can deposit your refund and then we could take our fee directly from that,’ that’s illegal,” Hockenberry says. Involving a third-party bank as part of a refund-anticipation loan is one thing, but who has control over the account is key.
5. ‘When will you finish my return?’
What you’re looking for: Accountability and organizational skills
If the preparer is taking in too many clients at tax time, chances are good he or she won’t get to your return by the April deadline. That could mean the preparer has to get you an extension or, worse, might leave you hanging. That could also mean a delayed tax refund. If you owe, your preparer’s backlog may also mean you have to make an estimated tax payment in April and then possibly face penalties and interest later when the preparer finally calculates your real tax bill, Evenstad says.
6. ‘Can you represent me in front of the IRS?’
What you’re looking for: Protection
Many preparers are happy to answer your audit questions or explain what a term means, but not all can speak on your behalf to the IRS.
“This is why you want a tax preparer that is at least an EA, CPA or an attorney,” Hockenberry says. Only people with those credentials can represent you before the IRS, even if they didn’t prepare your return. Preparers who hold an AFSP can represent you only under certain circumstances and only if they prepared your return.
7. ‘Are you here year-round?’
What you’re looking for: Customer service
You might not want to wait until next April to get tax advice, Hockenberry says.
“Things happen during the year,” she says. “Marriages, deaths, children being born, tax law changes. You might want to sell a property or stocks or get into business for yourself. Any number of things could happen during the year that you don’t really want to wait to discuss, because it could have a profound effect on your tax liability.”