This year, United States taxpayers must file their income tax forms before the April 18, 2022, deadline. Major life changes, business ownership, or simply a lack of knowledge about the ever-changing tax laws make finding a trustworthy tax preparer a good idea for many people. The Better Business Bureau warns, not all tax preparers have the same level of experience and training.
Katie Galan with the Better Business Bureau has some tips for finding someone you can trust with your finances and sensitive personal information.
Which type of tax preparer is right for you?
"First it’s important to understand the different types of tax preparers and their qualifications. Only enrolled agents, certified public accounts and attorneys may represent their clients to the IRS on matters such as audits, collection issues, and appeals," said Galan.
Enrolled Agent or an EA is a tax preparer that the IRS has approved to represent taxpayers. An EA must either have prior qualifying employment with the IRS or pass an intensive two-day exam on federal taxation and complete a background check. To maintain EA status, they must complete a specified number of credit hours each year of continuing education in accounting methods and tax regulations. An EA may work independently or as part of a firm and may specialize in specific areas of tax law.
An EA is a good option if you have a more complex tax situation. However, you’ll want to make sure their area of expertise applies to your situation. An EA is also qualified to help you with financial planning and give you tips that could help you reduce your taxes in the future.
Certified Public Accountants or CPAs have a college degree (or the equivalent in work experience). After passing a state professional qualifying exam, they are licensed and are known as highly skilled individuals in accounting.
"This makes them good candidates for complex tax planning and preparation if they are experienced in handling tax matters and enrolled in continuing education programs that keep them informed of the constant changes to tax laws. If your return is quite complex, a CPA may be your best choice for tax preparation," said Galan.
Tax attorneys often charge the highest fees as tax preparers. Hiring a tax attorney is a good option for taxpayers looking to legally shelter part of their income, or those who need specialized advice on municipal bonds, estate planning, and the like.
Non-credentialed tax preparers is somthing to be aware of. There are about 700,000 people who work as non-credentialed tax preparers in the United States. They often work part-time or only during the tax season. They must have an active preparer tax identification number through the IRS.
Most tax preparers are legitimate and competent, but keep in mind that they may be working off of their own personal research and experience without a national license requirement. Due to this, BBB highly recommends you conduct a thorough interview with the tax preparer before you hire them.
How to choose the right tax preparer?
When it comes to choosing the right kind of tax preparer for you, much will depend on the complexity of your tax situation. After you’ve decided what qualifications your tax preparer needs, the following tips will help you choose someone trustworthy and competent:
- Review the tax preparer’s credentials. EAs, CPAs and tax attorneys are all qualified to represent their clients to the IRS on all matters. Other preparers can help you with forms and basic matters but cannot represent you in an audit. Don’t be afraid to ask about these or other qualifications before hiring someone.
- Be wary of spectacular promises. Exercise caution if a tax preparer promises you larger refunds than the competition. Many such tax preparers base their fees on the amount of your return and may use shady tax preparation tactics. In addition, it’s wise to avoid tax preparers who offer “refund anticipation loans” as you’ll probably lose a large percentage of your return to commission fees.
- Get referrals from friends and family. One of the best ways to find a trustworthy tax preparer is to ask your loved ones for recommendations. Once you have a few options, check BBB.org, paying careful attention to other consumers’ reviews or complaint details. This will give you a clear view of what you can expect.
- Think about availability. If the IRS finds errors in your tax forms or decides to perform an audit, will your tax preparer be available to help you with the details? Find out whether you can contact the tax preparer all year long or only during tax season.
- Ask about fees ahead of time. Before you agree to any services, read contracts carefully and understand how much the tax preparer charges for their services. Ask about extra fees for e-filing state, federal and local returns, as well as costs for any unexpected complications.
- If things don’t add up, find someone else. If a tax preparer can’t verify their credentials, has a record of bad reviews from previous clients, or their business practices don’t seem convincing, don’t do business with them. Keep in mind that if you hire them, this individual will handle your sensitive personal information – information you need to keep safe from dishonest or fraudulent tax preparers.
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