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How to choose a tax preparer in the United States

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Luis Feliz
Luis Feliz
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RALEIGH, NC (February 7, 2022) – This year, United States taxpayers must file their income tax forms by the April 18, 2022 deadline. For many people, major life changes, business ownership, or simply a lack of knowledge about ever-changing tax laws make finding a reliable tax preparer a good idea. That said, not all tax preparers have the same level of experience. Here are our tips for finding someone you can trust with your finances and confidential information.

What type of tax preparer is right for you?
First, it is important to understand the different types of tax preparers and their qualifications. Only enrolled agents, certified public accounts, and attorneys can represent their clients before the IRS in matters such as audits, collection issues, and appeals.

Enrolled Agent (EA): An EA is a tax preparer who has been approved by the IRS to represent taxpayers. An EA must have previous qualifying employment with the IRS or pass an intensive two-day federal tax exam 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 your area of expertise applies to your personal situation. Fees and availability may vary, but you can expect an EA to charge less than a CPA. An EA is also qualified to help you with financial planning and advice that could help you lower your taxes in the future.

Certified Public Accountants (CPAs): CPAs have a college degree (or the equivalent in work experience). They are licensed after passing a state professional qualification exam. They are very skilled in accounting. This makes them good candidates for complex tax planning and preparation if they have experience handling tax matters and are enrolled in continuing education programs that keep them abreast of constant changes in tax laws. If your return is quite complex, a CPA may be your best option for tax preparation, but keep in mind that they will charge you much more than basic tax preparers.

Attorneys: Tax attorneys often charge the highest fees as tax preparers. For taxpayers looking to legally safeguard part of their income, or for those who need specialized advice on municipal bonds, estate planning and the like, hiring a tax attorney is a good option.

Unlicensed Tax Preparers: There are about 700,000 people working as unlicensed tax preparers in the United States. They often work part-time or only during tax season. These preparers are required to have an active preparer tax identification number (PTIN) through the IRS, but beyond that, regulation of tax preparers is done at the state level. In the vast majority of states, anyone can prepare tax returns for others without having to take an exam, obtain a license, or comply with other government regulations. Learn more about your state’s requirements here. Read more about “ghost tax preparers” here.

Most tax preparers are legitimate and competent, but keep in mind that without a national license requirement, they may be working from their own research and personal experience. Because of this, it is important that you conduct a thorough interview with the tax preparer before you hire him.

How to choose the right tax preparer.

When it comes to choosing the right type of tax preparer for you personally, a lot will depend on the complexity of your tax situation. Once you’ve decided what qualifications your tax preparer needs, the following tips will help you choose someone who is trustworthy and competent:

  • Check the credentials of the tax preparer. EAs, CPAs, and tax attorneys are qualified to represent their clients before the IRS in all matters. Other preparers can help you with forms and basics, but they cannot represent you in the event of an audit. Don’t be afraid to ask about these or any other qualifications before you hire someone.
  • Beware of spectacular promises . If a tax preparer promises you larger refunds than the competition, that’s a red flag. Many of these tax preparers base their fees on the amount of your return and are likely to use shady tax preparation tactics. Also, it’s wise to avoid tax preparers who offer “refund anticipation loans,” as you’ll likely lose a large percentage of your commission return.
  • Get referrals from friends and family. One of the best ways to find a trusted tax preparer is to ask loved ones for recommendations. Once you have a few options, check out BBB.org and pay special attention to reviews from other consumers or details of complaints. This will give you a clear view of what to expect.
  • Think about availability. If the IRS finds errors on your tax forms or decides to audit, will your tax preparer be available to help you with the details? Find out if you can contact the tax preparer year-round or just during tax season.
  • Ask about rates in advance. Before agreeing to any services, read the contracts carefully and understand how much the tax preparer charges for their services. Ask about additional fees for electronic filing of state, federal, and local returns, as well as fees for any unexpected complications.
  • If things don’t add up, find someone else. If a tax preparer can’t verify your credentials, has a track 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 person will handle your sensitive personal information, information that you must keep safe from corrupt or fraudulent tax preparers.

For more information you can trust, visit bbb.org.

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