Hiring a tax preparer

Hiring a Tax Preparer: 7 Tips You Need to Know

Hiring a tax preparer is a great way to make sure your taxes are accurate. Or is it? According to recent surveys by NerdWallet and Go Banking Rate, a third of Americans hire someone to do their taxes. However, more than two-thirds admit to not asking for the preparer’s credentials or if they will be represented in the event of an audit.

33.8% of Americans hire a professional to do their taxes for them:

  • 80% of that group do not ask for the tax preparer’s credentials
  • 75% of that group do not ask if the tax preparer will represent them in an audit

These numbers are surprising. When you hire someone to prepare your taxes, you entrust them with a large volume of personal data. There is also the expectation that they have a broad and up to date knowledge of the federal and state tax laws. Hiring a tax preparer who is trustworthy and fully qualified should be a top priority. Not doing so could lead to a costly mistake, legal trouble with the IRS, data breaches, fraud and more. 

7 Tips For Hiring a Tax Preparer

We recommend following these tips to ensure that you are hiring a tax preparer who is professional, certified, well-reviewed, and fully equipped to handle an audit if the need arises. 

1. Ask for the Tax Preparer’s PTIN (Preparer Tax Identification Number)

A PTIN (Preparer Tax Identification Number) is issued to anyone who prepares or assists with the preparation of a federal tax return, claims for refund, or other tax forms in exchange for payment. This standard allows the IRS to keep track of individuals who are preparing taxes in a professional capacity. Any reputable tax preparer would be aware of this requirement. 

2. Check Their Credentials (CPA etc.)

While it’s not necessary for a tax preparer to have certifications or degrees in accounting, these qualifications ensure a requisite level of experience and training. Look for preparers that are CPAs – certified public accountants, licensed attorneys, or enrolled agents who have completed the IRS Annual Filing Season program. It’s also a good idea to ask how long they have been working as tax professionals. 

A PTIN is relatively easy to get, but only attorneys, CPAs and enrolled agents have unlimited representation rights. They can work directly with the IRS on your behalf, including during audits, collections and appeals. 

Crosscheck their credentials using the: Directory of Federal Tax Return Preparers with Credentials and Select Qualifications.

Learn more about tax return preparer credentials and qualifications

3. Ask About Their Digital Security

Security is an often overlooked but essential consideration. The person who prepares your taxes has access to your personal information. You need to make sure they have safeguards in place to protect your information. If they do not, your data is vulnerable to identity theft.

Firms that have experienced a data breach are required to report it to state authorities. In some states, information about past breaches is publicly available. However, evidence of a past breach is not necessarily as important as asking your tax preparer about their current protocols. 

Questions to ask your prospective tax professional:

  • How will my physical documents and data storage devices be secured?
  • Who has access to my data?
  • Are their devices using any kind of anti-malware/ransomware/virus protection software?
  • Do they maintain any minimum standard of device security (passwords, MFA, etc.)?
  • What devices will be able to access my data?
  • What backup solution are they using to ensure critical data isn’t lost if they lose a device?
  • Are their devices managed by an MDM that allows for remote wipes if a device is compromised?
  • Are devices accessing my information from a single office/location or multiple ones?
  • What are the minimum network security standards at those locations (firewall, VPN, etc.)

4. Read Reviews from a Third Party

How does your prospective tax preparer fair on Google reviews, Yelp, and PTINdirectory.com? Watch out for red flags like being asked to pay upfront, past fraud claims, preparers who offer to pay the IRS for you. These might be an indication of fraud. 

Watch Out For Red Flags:

  • Promises you a bigger tax refund before reviewing your information
  • Ask you to sign a blank or unfinished return
  • Deposits your refund into their bank account
  • Is not transparent about their fees
  • Refuses to sign your tax return, including their PTIN

Source: Choose a Tax Preparer Wisely

You might also pay attention to reviews that mention the preparer’s work ethic, communication style, responsiveness, professionalism and personality. 

5. Talk on the Phone or in-Person Before Committing

Don’t trust strangers on the internet. A nice, professional website is undoubtedly a vote of confidence, but there is no substitute for speaking to someone directly when it comes to trusting someone with your financial information. 

Having a conversation with your prospective tax preparer will allow you to do a gut check and confirm that your tax preparer is who they say they are. You can also use this as an opportunity to gauge their communication style and ask essential questions to establish legitimacy and trust.

6. Ask if They E-File

E-filing is mandatory for specified preparers unless: the client chooses to file on paper or the return requires documents that the IRS will not accept electronically. Your tax preparer should be aware of their e-file requirements.

There is nothing inherently wrong with sending your taxes by mail, but it is slower, and there is a non-zero chance that your documents could be lost, delayed or compromised. We recommend going with a preparer who is willing and able to E-file your forms and send you confirmation that the IRS received the documents.

7. Get Referrals From People You Trust

Getting a referral from someone you trust can be a great way to start a new business relationship. Your friends, family, or coworkers can share their firsthand experience with you. However, you should still make sure to ask the tax preparer important questions before making it official. Remember, 80% do not ask for the tax preparer’s credentials. So, you’ll want to cover your bases to make sure your referral meets your standards. 

Finding Tax Preparers Online

If you are starting your tax preparer search from scratch, consider using the IRS Directory, which will allow you to search for preparers by qualification and zip code. You can also use the directory to crosscheck the qualifications of preparers you find online or on review sites.

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