Taxes: Tips and Red Flags when Choosing a Professional

Why should I be careful when choosing a tax professional?

The tax professional will have access to key personal and financial information, such as your social security number, income and investment information. You need someone knowledgeable and trustworthy.
You are still responsible. IRS Criminal Investigation (CI), notes, “Taxpayers are responsible for the accuracy of all entries made on their tax returns. This remains true whether the return is prepared by the taxpayer or by a return preparer.”

How much will I pay? How much you’ll pay a tax professional is based on many variables, such as the complexity of your return, how many schedules are needed, personal vs business income, etc. However, according to Better Financial Counseling Network’s, Jerry Zeigler, an Enrolled Agent (the highest credential the IRS awards), “A tax professional should be able to provide an estimate on the price and explain from the beginning what fax forms and services that price is based on. To avoid seeing a price increase, due to unexpected items requiring more tax forms, be as clear as possible with your professional about your situation.”

Looking for free resources to help with taxes? 2020 Taxes: 2 Warnings & 3 Resources to Help You File – Better Financial Counseling Network

Interview before deciding: As with any major purchase, it’s best practice to interview a few tax professionals, before making your decision. Zeigler states, “One way to help choose a tax professional is to get referrals from friends who have had a similar tax situation. Another method is to ask a tax question that you know the answer to as a screen of the professional’s answer. A more vague or evasive answer may be a red flag. Screening questions like this are a bit subjective and can have limitations, but they can be helpful.” If you are married, make sure both spouses are comfortable with the tax professional. This person may be a long-term resource, so it is important everyone is comfortable with not only the professional’s advice, but their manners and personality as well.

Utilize the Directory of Federal Tax Return Preparers with Credentials and Select Qualifications is a free searchable and sortable database. It includes the name, city, state and zip code of credentialed return preparers who are CPAs, enrolled agents or attorneys, as well as those who have completed the requirements for the IRS Annual Filing Season Program.

What Red Flags should I watch out for? IRS Criminal Investigation (CI) provides the following tips”

Avoid return preparers who claim they can obtain larger refunds than other preparers.
Avoid preparers who base their fee on a percentage of the amount of the refund.
Use a reputable tax professional that signs and enters a preparer tax identification number (PTIN) on your tax return and provides you with a copy for your records.
Consider whether the individual or firm will be around to answer questions about the preparation of your tax return, months, even years, after the return has been filed.
Never sign a blank tax form.
Ask questions. Do you know anyone who has used the tax professional? Were they satisfied with the service they received?

Zeigler added, “One thing to remember is that you don’t have to pay a tax professional for filing a tax return until the return is provided to you or it is electronically filed. Some reasons you may not continue with a professional include: they don’t ask probing questions needed to file a correct return, they don’t review the return with you adequately or they are unwilling to address your questions about the return, they don’t have a PTIN or are unwilling to sign the return as the tax preparer. If you get to the point of filing and you are not comfortable, you can walk away with the tax documents you provided.”

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