The Internal Revenue Service (IRS) recommends that taxpayers choose their tax preparer wisely. The main reason behind this recommendation is that the taxpayer is ultimately responsible for all the information in the income tax return, no matter who has actually prepared the tax return.
The ten steps from the IRS are:
1. Check the Preparer’s Qualifications. The IRS provides a directory of federal tax return preparers with credentials and select qualifications. This directory is available on the IRS website (www.irs.gov), and includes the following:
- Certified Public Accountants (CPA)
- Enrolled Agents
- Enrolled Retirement Plan Agents
- Enrolled Actuaries
- Annual Filing Season Program participants
There are new rules that do allow non-credentialed tax preparers represent clients before the IRS on any returns prepared and filed after December 31, 2015. Certified public accountants, attorneys and enrolled agents are the only ones who can represent any client before the IRS in any situation.
2. Check the Preparer’s History. The Better Business Bureau (BBB) should be consulted for the CPA and the State Board of Accountancy. For the attorneys, the state bar association, and, for the enrolled agents, the IRS directory.
3. Ask about Service Fees. Stay away from preparers that base their fees on a percentage of the client’s refund. Also, stay away from preparers that promise bigger refunds than the competition. Never allow a refund to be deposited into the preparer’s bank account. Refunds should always be deposited directly into the taxpayer’s bank account.
4. Ask to E-file the Return. The IRS has safely processed more than 1.5 billion e-filed tax returns.
5. Make sure the Preparer is available. The taxpayer might want to contact the preparer after the April 18, 2016 due date. Avoid phantom, or flight by night preparers.
6. Provide Records and Receipts. The preparer should ask to see records and receipts. The preparer should also ask questions regarding all types of income, local and foreign bank accounts, tax deductions and credits.
7. Never sign a blank return.
8. Review the return before signing.
9. Ensure the Preparer signs and includes their PTIN. All tax preparers must have a PTIN (preparer tax identification number).
10. Report Abusive Tax Preparers to the IRS. Any suspicion of tax fraud or abusive conduct must be reported to IRS. The IRS has Form 14157 to report tax fraud. In addition, Form 14157-A should also be used to report a preparer that has filed, or changed a tax return without the consent of the taxpayer.
Article written by Stanley Foodman, CEO of Foodman CPAs & Advisors. This article has been published in: