The IRS gives guidance on how taxpayers who choose to hire the services of a paid tax preparer can choose a qualified preparer and avoid dishonest and unscrupulous tax return preparers.
It is not mandatory for someone else to file your tax returns for you except you must understand what it takes to file an accurate return. In fact, one of the good reasons you should consider filing your own income taxes returns is that you may have the opportunity to learn your obligations and rights such as your gross or (modified) adjusted gross income, taxable income, credits and deductions as well as your refunds if qualified. Usually, during tax seasons, paid preparers are too busy handling the returns of a lot of their clients that most do not have the time to review every single detail of these obligations and rights.
You must understand that even though the paid tax return preparer is primarily responsible in assisting you file an accurate tax return, you are ultimately responsible for the accuracy of every item reported on your return. Therefore, you must know and understand what items are on your return and why it’s reported. If you cannot, then you need to hire a paid tax return preparer to file your returns for you. There are some things that make filing your return a bit complex such as when dealing with IRAs or other items that require more technicalities and business tax. In such circumstances, we highly recommend hiring the services of a professional.
If you choose to have someone prepare your tax return, choose that preparer wisely. A paid tax return preparer is primarily responsible for the overall substantive accuracy of your return and by law, is required to sign the return and include their Preparer Tax Identification Number (PTIN) on it. Although the tax return preparer always signs the return, you are ultimately responsible for the accuracy of every item reported on your return. Anyone paid to prepare tax returns for others should have a thorough understanding of tax matters and is required to have a PTIN. You may want to ask friends, co-workers, or your employer for help in selecting a competent tax return preparer.
Most tax return preparers are professional, honest, and provide excellent service to their clients. However, dishonest and unscrupulous tax return preparers who file false income tax returns do exist. There are State bodies such as the California Society of Tax Consultants (CSTC), which has a database of all of the Tax Consultants from which you can search whether a preparer is active or not. You can also check from the IRS for all active preparers.
Before making the decision, here are a few things to consider:
- Check the tax preparer’s credentials to ensure the tax preparer meets your specific needs.
- Make sure the tax preparer has one of the following credentials:
- Certified public accountants (CPAs) and public accountants (PAs).
- Licenced Attorney.
- An Enrolled Agent (EAs) or
- A Paid Tax Preparer with a valid PTIN
- Determine who will prepare your tax return before you contract for the service. Avoid tax preparers who delegate work to someone with less experience or knowledge.
- Ask if the tax preparer has a professional organization affiliation. The organization should provide or require its members to obtain continuing education and require them to adhere to an ethics code.
- Be weary of tax preparers who guarantee a larger refund than other tax preparers. Given the same information, any qualified tax preparer should arrive at similar numbers.
- Select a tax preparer who can assist you if the IRS or the Franchise Tax Board (FTB) contact you or audit your tax return.
- Understand your tax return. A good tax preparer should clearly answer any questions about your tax return.
- Review all information before you sign your tax return: name, address, social security numbers, or other tax identification numbers.
- E-file and request a direct deposit refund. You generally receive your refund within 10 days.
- Understand the fees and interest rates tax preparers may charge on Refund Anticipation Loans (RALs). Possibly, avoid tax return preparers who base their fees on a percentage of the refund or who offer to deposit all or part of your refund into their financial accounts.
A paid tax return preparer is required to have a current Preparer Tax Identification Number (PTIN) from the IRS and is required to renew it annually to be able to file a tax return. You must neve sign a blank form and must always have a copy of the return.
Visit irs.org or your State tax agency such as ftb.ca.org for California contact us for details.
Credit: Prime2Prime Ideas Research/IRS/FTB
