How to Choose the Right Tax Return Preparer
Picking a good tax preparer can make filing your taxes a lot easier and make sure everything is done right, keeping you safe from legal or money troubles. But, if you choose a bad or unqualified person to do your taxes, it could cause a bunch of problems, some of which might be pretty serious.
Here are some of the potential consequences of choosing the wrong tax professional.
Incorrect Tax Return Triggers and IRS Audit
An unskilled or careless preparer may make errors on your tax return, such as incorrect income reporting, improper claiming of deductions or credits, or overlooking important tax laws.
This can lead to an inaccurate tax return which could trigger an IRS audit. Dealing with an audit can be time-consuming, stressful, and may lead to additional taxes, penalties, and interest if inaccuracies are found.
Significant Legal Risk from Fraudulent Activities
An unethical preparer might engage in fraudulent activities like inflating deductions, claiming fake credits, or manipulating income statements. Such actions can put you at significant legal risk. The IRS holds the taxpayer responsible for the information on the return, not the preparer.
Steer clear of preparers who boast about obtaining larger refunds than their competitors. This could be a red flag for shady practices.
For businesses, the repercussions of a bad tax return can lead to reputational damage if the issues become public knowledge.
Lost Time and Money
Correcting mistakes on a tax return can be a time-consuming process. You may need to file amended returns and communicate with the IRS, which can be a lengthy and complex process.
Additionally, you may suffer a financial loss because you will incur the cost associated with filing an amended tax return and may have to pay a tax attorney or enrolled agent to represent you before the IRS.
Identity Theft
Untrustworthy preparers might misuse your personal and financial information, leading to identity theft and financial fraud.
While most tax return preparers are honest and professional, it's important to be vigilant against the minority who are not. Remember, you are ultimately responsible for the information on your tax return, so choosing the right preparer is crucial. If you encounter misconduct or improper practices by a tax return preparer, you have the option to file a complaint.
If a non-credentialed preparer makes errors on your return, you may not be able to recover any losses incurred due to those errors. Always review your return carefully before submission to avoid potential financial and legal problems. To avoid these consequences, it's important to thoroughly vet your tax preparer, ensuring they have the proper credentials, experience, and a good reputation.
Selecting the right tax return preparer is a significant decision and should be done with care.
Here are some essential tips to guide you in this process:
Interview the Preparer
Before hiring, have a conversation with the preparer. Assess their communication skills and willingness to answer your questions. A good preparer should be interested in understanding your entire financial situation.
Verify the Preparer’s Credentials
Look for a preparer with appropriate qualifications. Not all preparers have the same representation rights before the IRS. Only attorneys, CPAs, and enrolled agents can represent taxpayers before the IRS in all matters, including audits, collections, and appeals. Other tax return preparers who participate in the IRS Annual Filing Season Program have limited practice rights to represent taxpayers for audits of returns they prepared and signed. These professionals have rigorous training and are licensed, which means they are well-equipped to handle complex tax situations.
Ensure that your tax return preparer has a valid PTIN, which is mandatory for anyone preparing or assisting in preparing federal tax returns for compensation. A reputable tax professional should willingly provide their PTIN on your tax return, sign your tax return, and offer you a copy of it.
Experience and Specialization
Consider the preparer's experience, especially in handling tax situations similar to yours. If you have specific needs, such as owning a business or having rental properties, look for a preparer with experience in those areas. Referrals and Reviews
Consider seeking referrals from trusted sources like friends, family, or financial advisors. Online reviews can also provide insights into the preparer's reliability and quality of service.
Expect Detailed Inquiries
Professional preparers will request to see your records and receipts and ask questions to determine your total income, as well as any applicable deductions and credits.
Consider Long-Term Availability
Choose a preparer or firm that you can access in the future, should any questions or issues arise about your tax return in the future.
Review Before Signing
A reputable tax preparer will ask you to review the completed return and explain it before you sign it. Never sign a blank tax form or a form you don’t understand.
Understand Fee Structures
Understand how the preparer charges for services. Avoid preparers who charge fees based on a percentage of your refund or suggest depositing your refund into their accounts. This practice is not standard and could be indicative of unethical behavior.
Audit Support
Ask if the preparer offers audit support or representation services in case of an IRS audit. Not all preparers have representation rights, so it's important to clarify this beforehand.
In summary, picking the right person to help with your taxes is super important for a smooth and accurate tax filing experience. Make sure you choose someone who is qualified, experienced, and trustworthy. It's important because, in the end, you're the one responsible for what's on your tax return.
We hope our tips have helped you learn how to choose the right tax preparer. Schedule an appointment with our tax professionals to ensure a stress-free tax season. A good tax preparer is more than just a helper; they're a key partner in keeping your finances on the right track.
