If you are not doing your own taxes you better make damn sure the person you pay to do them knows what they are doing! The tax payer is ultimately responsible for any false claims, evasion or mistakes and you could be looking at criminal charges. This is serious business.
Finding a good tax professional does not have to be hard. You just have to know who you are looking for and that they are fully qualified. There are plenty of well known and reputable companies. But according to the Government Accounting Office (GAO) most tax mistakes are the result of hiring a tax professional. According to the GAO, taxes prepared by hired professionals had a higher estimated percent of errors, 60 percent, than those prepared by the the tax payer, 50 percent.
The really dangerous thing is that anybody can claim to be a tax preparer. To declare yourself a tax preparer all you need is $50 to buy a tax identification number from the IRS. You don’t need a CPA license or formal education. No questions asked.
So if you’re going to hire a pro you want to choose wisely and the IRS Preparer Directory is where you want to start. The IRS database of tax pros launched about a year ago and includes a listing of tax preparers who have voluntarily submitted their credentials. The database of enrolled agents complete at least 72 hours of tax education every three years. You can search the database here.
Understanding who is doing your taxes is key. You have several choices besides the enrolled agents.
- Certified public accountants or CPAs are accountants who have qualified through state exams and met specific education and experience requirements for that title. The IRS also offers a list of certified electronic tax preparers. But keep in mind that not all CPAs area tax professionals. You need to ask and check their credentials.
- Tax lawyers and tax preparation companies like H&R Block. Tax attorneys are best for handling complex tax disputes, corporate matters, and handling the tax returns of enormously wealthy people. Unless you have a few million you should be ok with a tax prep company.
But be warned that tax prep companies like H&R Block or Jackson Hewitt and Walmart are designed to complete as many tax returns as quickly as possible. These companies use people who have limited training or are seasonal employees and quality control is suspect. A few years ago when the GAO went undercover to get returns done at these companies, nearly all of the returns were incorrect to some degree. If your tax return is wrong you are still responsible. Some will go with you if you are audited and some will even pay the penalty if there is one. But you are still responsible for any additional taxes or false claims.
One of the safest steps you can take when looking for a tax pro is to interview them. Check their reputation and background with the Better Business Bureau, make sure they have a tax preparer identification number (PTIN) for what it’s worth. Ask;
- What professional organizations does the preparer belong to?
- How long have they been doing tax returns?
- Ask about their educational background.
- Ask for references and call to find out if the preparer is reliable and professional.
- Get contact information, address, phone number and email. Get business hours and an after hours contact number if possible. When and how can they be reached is vital. You don’t want someone disappearing with all your tax documents.?
- Can they be contacted after April 15th if necessary?
- What are their rates and how are their fees calculated? For example do they charge by the hour or is there a flat rate per return? Are there additional charges for more complex returns? You want to make sure you know how much you’ll be paying, including for any phone calls.
- Do they offer other services such as estate or financial planning?
- What records and receipts do you need from me? How are they transmitted and secured. Remember your life is in those papers!
- What happens if my return is audited?
- Do you offer electronic filing?
Word of mouth is the best advertising so check with friends, relatives, co-workers. Your employer may have a recommended tax preparer. You can find tax professional on places like Yelp, Angie’s List, The American Institute of Certified Public Accountants and National Association of Enrolled Agents website.
Other Tax Season 2016 articles from the African-American Cyber Report