How to choose a tax preparer

Recently, I attended a webinar hosted by the IRS on the different types of tax preparers (Exciting, right?). They gave us a wealth of information and several resources to help guide you to the best tax preparer for your situation. Since the annual filing deadline is coming up on April 15th, I wanted to highlight some of the preparer qualifications you should look for and give you some resources for locating the most awesome tax preparer you can. 

Tax Preparers with Licensed Professional Qualifications

The first, and most well-known, tax preparer is the Certified Public Accountant (CPA). CPAs are licensed by each state they practice in and complete several hours of continuing education each year. For CPAs who prepare taxes, they generally do this all year long. There is not a “tax season” for them. Rather, they refer to the period between January and April as “busy season.” They are still preparing tax returns from April until the extension deadlines in September and October. They get a short break for November and December before starting it all over again in January. In short, these folks eat, sleep, and breathe taxes. They are your best bet for complicated tax situations and probably the most knowledgeable preparers out there. 

Along the same lines as CPAs are attorneys who specialize in tax. Attorneys must also be licensed by the states in which they practice and have continuing education requirements as well. Most of these offices focus on tax law questions or larger estate tax situations. They handle mainly wealthier clients who need a strong legal team along with tax guidance. 

Tax Preparers with Other Professional Qualifications

Another group with professional qualifications that are not as well known are the Enrolled Agents (EA).  Enrolled agents are licensed by the IRS and must attend continuing education on taxes each year. Unlike CPAs, they focus solely on tax preparation and don’t prepare financial statements or perform audits. While they are licensed by the IRS, the qualifications to become an EA are not as stringent as those to become a CPA, only because EAs skills do not encompass as broad a scope as CPAs. 

A group mentioned in the webinar that is new to me is the Annual Filing Season Program Participants. According to their IRS webpage, these are “non-credentialed return preparers who aspire to a higher level of professionalism.” This group attends continuing education on taxes and agrees to adhere to specific practice obligations. 

You also probably see companies such as Jackson Hewitt, HR Block, and Liberty Tax, etc. Each of these companies has their own training courses for their representatives to be tax preparers. This means that while there is training, tax preparers for those companies do not have a professional accreditation and are not the same as an EA. 

A few warnings

Not every person who promotes themselves as a tax preparer is legitimate. Here are two types to look out for as you search. 

PTINs

One item that the public needs to be aware of is the PTIN or Practitioner Tax Identification Number. Anyone who prepares tax returns for compensation is required to obtain a PTIN. Not only are tax preparers required to obtain a PTIN, but there are no limits on who can obtain one. To get one, all you do is register on the IRS website and pay the annual fee. So when you see someone listing a “PTIN” as a qualification, it’s a bit misleading. The PTIN has nothing to do with a person’s qualifications or experience in preparing tax returns. Be careful of places that advertise their PTIN as something akin to a professional qualification.

Ghost Preparers

One group of preparers the IRS specifically told us to stay away from are “ghost” preparers. These are people who prepare your tax return for compensation, but then do not sign it as the tax preparer. They require you to sign it as if you prepared it yourself. A lot of times, these people have submitted incorrect or fraudulent information on your return. They may have invented income to qualify their clients for tax credits or boosted deductions in order to get a bigger refund. They may also have your refund set up to be direct deposited into their bank account. For any tax return you don’t prepare yourself, the IRS urges you to read over it and make sure you understand the numbers that are being reported. They also urge you to double-check the bank account information showing on the return. 

Finding a Tax Preparer

The IRS publishes a directory of tax preparers and updates it frequently. If you need help finding a tax preparer, I urge you to begin your search there. Once you have some qualified candidates, check out my previous blog on how to find a tax preparer. You can also email me for my list of local referrals.