Looking for a tax preparer? Here's how to pick the right one.
Tax preparers do a big chunk of America鈥檚 tax returns 鈥� more than 80 million a year, according to the IRS 鈥� but if you鈥檙e nervous about handing confidential information to someone in a largely unregulated field, you鈥檙e not alone. Here are some tips to help you find a good tax preparer and reduce the risk of expensive errors and exposing your finances.
Decide if you really need a tax preparer
Everyone鈥檚 tax situation is different, but many millions of them are simple enough 鈥� some聽聽from work, mortgage interest or a few other obvious聽聽鈥� to handle in-house. If that鈥檚 the case, it might be cheaper and faster to buy software and do your taxes yourself.
鈥淥bviously the more you have going on, the more I would say go see a preparer,鈥� says Trish Evenstad, president of the Wisconsin Society of Enrolled Agents.
If you do need a preparer, be choosy
鈥淚 wouldn鈥檛 just simply go through the phone book and pick someone randomly,鈥� says Melissa Labant, director of tax policy and advocacy at the American Institute of CPAs. Asking friends, family or colleagues for recommendations can quickly reveal a preparer who鈥檚 caused headaches, she said.
Tax attorneys and enrolled agents specialize in or have passed exams on tax rules, and many certified public accountants also specialize in tax preparation. At a minimum, Labant says, a legitimate preparer should have a Preparer Tax Identification Number, or PTIN, from the IRS.
Never assume that because someone works at a big tax-prep company he or she must be an enrolled agent or a certified public accountant, Evenstad warns. And don鈥檛 assume a PTIN is valid, either 鈥� a 2014 Government Accountability Office study caught some unscrupulous preparers using fake PTINs or ones that didn鈥檛 belong to them. You can聽, and you can check accounting and law licenses on state-level CPA and bar association websites. The National Association of Enrolled Agents also maintains a directory.
Know what to look for
The IRS requires paid tax preparers to put their name and PTIN on returns they prepare. Not doing so, or asking you to sign a blank return first, suggests a preparer is up to no good, Evenstad said. Directing your refund to a bank account that鈥檚 not yours is another red flag. And make sure your return doesn鈥檛 say 鈥渟elf-prepared.鈥�
Good preparers will also ask for last year鈥檚 return, Labant says. 鈥淚f they don鈥檛, then you鈥檒l know right away this person is not exercising due diligence and they could easily be missing several key items that need to be reported on your tax return.鈥�
The preparer should provide a secure portal for sending information, too.
鈥淚f someone called me and said, 鈥楯ust email me a copy of your driver鈥檚 license,鈥� that would make me a little nervous about how well they鈥檙e protecting taxpayer identification information,鈥� Labant says.
Report bad apples
If, despite your efforts, a preparer wrongs you, you have a few options. You can complain to the IRS by filling out Form 14157 and sending along supporting documents. Alerting the National Association of Enrolled Agents, the National Association of Tax Professionals and other professional groups might also spark an internal investigation if the preparer is a member, Evenstad says.
Getting restitution, though, might be harder. According to Council of Better Business Bureaus data, just 66 percent of customer complaints against tax preparers in 2015 were resolved 鈥� well below the national average of 79 percent across all industries, according to BBB spokesperson Katherine Hutt. By comparison, the cellular industry and banks usually have 98 percent and 97 percent resolution rates, she notes.
鈥淢ost of the time, when people are unhappy with a service like that, it鈥檚 because they didn鈥檛 check out the company ahead of time. Their complaints are usually the same thing that previous customers have complained about,鈥� Hutt says.
If a preparer steals from you, call the police and file a complaint with the IRS.
鈥淚f they鈥檝e stolen your identity, you definitely want to turn them in to the [IRS] Office of Professional Responsibility,鈥� Evenstad says. 鈥淏ecause if they鈥檝e stolen yours, they鈥檝e probably stolen other people鈥檚.鈥�
Good preparers who make honest mistakes usually will pay your penalties, though any extra taxes will likely be on you, Evenstad adds.
Tina Orem is a staff writer at NerdWallet, a personal finance website. Email:聽torem@nerdwallet.com.
This article was written by and was originally published by The Associated Press.
