Depending on your financial situation, filing your own taxes costs little more than a few hours of time. However, if you own a business, work freelance, plan to itemize your deductions, have recently gotten married or had a baby, you may find your taxes have become a lot more complex. In that case, it may be a good idea to hire a professional tax preparer to help file your taxes.
Types of Tax Preparers
There are several basic types of tax preparers: certified public accountants, enrolled agents, tax attorneys and noncredentialed preparers.
The first three types must meet continuing education and licensing requirements and are bound by ethical standards. They're also the only professionals who can represent you before the IRS on all tax matters, including audits, collections and appeals. Others may only represent you for audits of returns they actually prepared.
Tips for Choosing the Right Tax Return Preparer
Even if a professional is filing your taxes, remember that you're still legally responsible for all information on the return. So, if the preparer makes a mistake or intentionally provides inaccurate information, you could be on the hook for any taxes, interest and penalties.
To help find the most skilled and experienced preparers, try the online directory of tax return preparers from the IRS. You can also follow these tips:
- Request a free initial consultation during which you can discuss your needs and ask questions.
- Be wary of tax preparers who claim they can get you a bigger refund or who try to sell you another product funded against your tax return.
- Avoid preparers who base their fees on a percentage of the refund.
- Consider whether the individual or firm will be around to answer questions about the return months or years after it’s been filed.
- Check their credentials and find out if any complaints have been filed with the Better Business Bureau.
Questions to Ask a Tax Return Preparer
Before committing to a tax preparer, try asking these questions:
- Do they have a Preparer Tax Identification Number (PTIN)? If someone is being paid for their tax preparation services, they must have a PTIN.
- Will they outsource your return's preparation? If the answer is yes, your personal information could be transmitted electronically to another firm, possibly outside the U.S.
- How are their fees determined? Some preparers charge by the number of forms or schedules filed, others by the hour. Compare the rates of several preparers to get the best value.
- What’s their experience with IRS audits? Do they charge additional fees should they need to represent you in an audit?
- What’s their policy for reimbursing potential fines, penalties and interest on a return they’ve prepared? The preparer should have insurance for that purpose.
What You Need to Know for This Year’s Tax Season
Whether or not you decide to use a tax return preparer, it’s important to stay up to date on this year’s tax return deadline and recent changes to tax law.