How To Select The Best Income Tax Preparer

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Looking for someone to lend a hand while doing your taxes this year? You're not alone.

According to a 2011 report from the National Retail Federation, more than 40 percent of taxpayers either use an accountant or a tax preparation service to prepare their taxes, while the remainder either do it themselves using computer software or ask a friend or relative to help them.

If you haven't used an income tax preparer before and are unsure of where to begin looking for one, we've prepared a handy guide with points to consider while shopping around for the best service.

Consider The Credentials

Tax preparation specialists come in various stripes: certified public accountants (CPAs), enrolled agents, tax attorneys, accredited tax advisers/preparers and national tax preparation companies. Some consider the first three to be the most skilled and qualified when it comes to preparing your taxes, as these professionals are required to stay up-to-date on tax law by continuing their education throughout their careers. However, for simple, straightforward tax returns, the national tax preparation companies offer a low-cost option.

A Note About The PTIN

The Internal Revenue Service now requires that tax preparers have a basic competency in tax preparation. Therefore, it has instituted basic testing and ongoing education requirements for tax preparers. Tax preparers who have completed all the requirements receive a Preparer Tax Identification Number (PTIN). Before choosing a preparer, make sure that he or she has an active PTIN.

Look Outside Your Geographic Region

Choosing someone to do your taxes based on the fact that he or she is located in your town is no longer a necessity and some believe that by limiting yourself geographically, you might be missing out on some well-qualified individuals. "In a similar vein, the selection of a professional advisor based purely on family tradition or personal friendship is dangerous and expensive," writes CPA Kerry Kerstetter on his blog, Taxguru.

Check References

Since your financial wellbeing is on the line when making this decision, you'll want to be diligent about checking references and records at the Better Business Bureau before making your final decision. The IRS recommends taxpayers "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."

Assess The Fees

The amount you pay for a tax preparer will factor into your decision (don't forget that this expense can be written off on next year's taxes). The bottom line is that you should not overpay to have your taxes done. Shop around to make sure you are getting a fair price before making a decision. Keep in mind that sometimes preparers may give you a low-ball estimate which will turn out to be more expensive in the end. And sometimes you will have to pay a bit more for services that can save you substantial money and hassle in the long run. "Avoid preparers who base their fee on a percentage of your refund or those who claim they can obtain larger refunds than other preparers," the IRS said.

Interview Various Prospects

You are in the driver's seat when it comes to hiring your tax preparer so don't choose the first person you see in the Yellow Pages. There is absolutely nothing wrong with interviewing several different prospects in order to find the right fit. Do you have a specific tax need that will require specialized knowledge? Ask three to five potential preparers how they would address a specific scenario. This will help you weed out those who lack knowledge, interest or integrity and match you with the right professional.

Make Sure Your Tax Preparer Is Accessible

The IRS notes that, even after tax day (April 17 this year), you will want to make sure that your tax preparer is available for questions because tax issues often arise throughout the year. Someone who keeps regular, full-time hours is preferable to someone who files taxes as a "side business."

At Filing Time...

Be sure to review your entire tax return before it is officially filed. Make sure you ask questions and demand any necessary clarifications before sending the document on to the IRS. Remember, even though you may have hired professional assistance, it's still your name that is attached to the return and you are the one responsible for all the information contained in it. The IRS warns taxpayers not to sign a blank return – one of many tax scams that have cropped up in recent years. (For more information on tax scams, see 12 Common Tax Return Scams To Avoid.)

Choosing the right tax preparer takes time, but it is time well spent when you consider that the difference between the right preparer and the wrong one could be thousands of dollars (not to mention time and frustration should you be audited).

Sources

Last Updated: February 12, 2012
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About Cynthia J. Drake Cynthia J. Drake is a contributing author to CanDoFinance.com. Cynthia is a personal finance writer who lives in Michigan.

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