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Frequently Asked Questions
When should I contact an Tax Preparer?
Tax preparation is a great option for anyone who doesn't want to deal with the hassle of taxes, but there are some situations where using a preparer sounds less like an option and more like a mandatory step. Jeff Rose, writing from Good Financial Cents, recommends these scenarios as times to seek out professional help:
- You own, sold or started a business
- Have many investment losses or gains
- Capital asset transactions
- Real estate transactions
- Change in marital status
- Your income and residence are not in the same state or country
- Trust Fund Transactions
- Completing a Schedule for Self-Employment Income
The reason he recommends a tax preparer for these scenarios is because these situations change what applies to you as a taxpayer based on the federal tax code, which in turn affects your return.
What Should You Ask a Potential Tax Preparer?
Before entrusting your finances with someone else, you need to be assured they're legit. Here are some questions to keep in mind when choosing a tax preparer:
- Do you have a PTIN (Preparer Tax Identification Number)?
- What is your tax background?
- What taxes do you specialize in?
- Do you know state and local requirements?
- When will I receive a copy of my return?
- How are your fees determined?
- How will I receive my refund?
How the tax preparer handles these questions could also be indicative of their temperament. Don't be afraid to shop around for different tax preparers if these questions present difficulty for your preparer to answer.
How can I know which accountant is right for me?
Is your tax preparer set to fleece you out of your potential earnings? There are definitely signs you can pick up on. Does the tax return they promise you sound suspiciously high? Furthermore, is their pay based upon a percentage of the projected return? To help you weed out the wonks, here are some of the tips the IRS recommends to avoid fraudsters:
- Check the preparer's qualifications using the IRS Directory of Federal Tax Return Preparers with Credentials and Select Qualifications.
- Check the preparer's history by asking the Better Business Bureau about them. You can also check for disciplinary actions and the license status for credentialed preparers. For your tax CPA, you might want to reference the State Board of Accountancy for legitimacy. Tax attorneys can be checked against the State Bar Association.
- Inquire if the preparer offers IRS e-file and ask to e-file the tax return. Besides being one of the "safest and most accurate ways to file a return," according to the IRS, paid preparers who do taxes for more than 10 clients generally must file electronically.
- Never sign a blank return, and avoid tax preparers who request you do so.
Be especially wary if you're an elderly or low-income taxpayer, as those are the usual targets of scammers. You can report abusive preparers using Form 14157.
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