Top 10 tips on selecting a tax professional

10 Tips on Choosing a Reputable Tax Preparer

The IRS has officially started accepting 2016 tax returns for processing. More than 180 million tax returns will be processed this year, many of them prepared by tax practitioners. The practice of accountants and tax preparers is one of the most heavily regulated and ethical professions. Moreover, we firmly believe the vast majority of tax preparers are reputable, competent and trustworthy individuals. Despite the ethical and regulatory frameworks, there are tax preparers that do not follow even the core principles of the profession. Therefore, the Internal Revenue Service advises taxpayers to apply scrutiny and choose wisely. Based on the IRS recommendations and our perception of good business practices, we have selected the top 10 tips on choosing a legitimate tax professional.

Understand the tax professional's qualifications.

As a rule of the thumb, it is always wise to make sure the tax preparer is qualified to do the job for you. But how to be sure when there is a sea of different qualifications and a myriad of professional abbreviations? Well, we had outlined the five major types of tax professionals based on eligibility to practice before the IRS and selected tax-related qualifications. Keep on reading.

  • Tax Attorneys have unlimited practice rights before the IRS. They are lawyers specializing in the legal and regulatory side of the taxation system. All lawyers are members of and are regulated by a State Bar Association. Moreover, the attorneys are the only practitioners who may represent you in courts under the protection of the attorney-client privilege of information clause. Therefore, a tax attorney is ideal for litigation and tax controversies, including assistance during an IRS examination. You may also engage a tax attorney to prepare your tax return or assist you with tax law implementation or interpretation issues.
  • Certified Public Accountants or CPAs are licensed by a State Board of Accountancy after a CPA examination, background, education, and experience checks. CPAs have unlimited practice rights before the IRS. However, not all CPAs deal directly with taxation. Many CPAs specialize in audits, mergers, acquisitions, managerial or financial accounting, or business consulting. Therefore, a CPA focusing on tax matters or holding a degree or certification in taxation will be an excellent choice for income tax return preparation, planning or advisory services.
  • Enrolled Agents or EAs are also eligible to practice before the IRS without limitations. The EAs are the only tax practitioners regulated on the federal level directly by the IRS. They pass a rigorous examination and a background check. EAs specialize predominantly in taxation and are therefore ideal for tax return preparation, tax planning, and advisory services.
  • Annual Filing Season Program or AFSP practitioners are required to complete a voluntary 18-hour continuing education program to receive the AFSP designation. AFSP participants have limited practice rights before the IRS allowing them to represent a client whose tax return they have prepared. Most of them provide only tax return preparation and auxiliary services.
  • Unenrolled Return Preparers are all other unregulated or unlicensed tax practitioners. Depending on state law requirements, they are allowed to prepare tax returns but have no practice rights before the IRS.

Check the tax preparer's history.

Browse the Internet for a history of noncompliance and unresolved complaints from peers. Many organizations in the USA and Canada, such as the Better Business Bureau are devoted to consumer protection, honest business-client relationships, and best business practices. You may find the BBB website useful if you look for unresolved complaints against a tax professional. Other websites such as Yelp!, Google and social media may also be a great place to start your research. The IRS Directory of Federal Tax Return Preparers is another source of basic information. Those of you who need a great deal of confidence could approach the governing bodies of regulated professions to inquire about disciplinary sanctions against a tax professional. For instance, contact the State Bar Associations to check on Attorneys, the State Boards of Accountancy for CPAs, or the IRS Office of Professional Responsibility for Enrolled Agents.

Find out about service fees.

Verify the preparer maintains a fee schedule and all fees are clearly stated and free of contingencies. Charging fees contingent on a percentage of the tax refund or gross income is not prohibited when it comes to tax return preparation. However, tax preparers who charge contingent fees may be induced to exaggerate your credits and deductions or omit income from your tax return to maximize your refund and their fees respectively. Therefore, many professional organizations and governing bodies impose contingent fee restrictions on their members. In any case, it is advisable to beware of practitioners who charge contingent fees, implement shady practices, or fail to state clearly their fees in advance.

Make sure the tax preparer is accessible year-round.

Some practices are seasonal and shut the door on your after April 15th. There is nothing wrong with it so long you have received the yellow check, and your circumstances do not change by the year-end. Hence, many life events have an impact on your future tax liability and an experienced tax professional familiar with your affairs could be a lifesaver. Consequently, it won't hurt to make sure you will be in a position to contact your preparer at any time, even after the date the return was filed.

Provide the records needed to complete your return.

All paid tax professionals are required by law to protect your personal information from interference and misuse. The tax professionals are also responsible for the accuracy of the tax return and by law must sign the returns they have prepared. Because of the due diligence and statutory requirements, reputable practitioners will not assert positions or take deductions on your tax return without a complete set of records or detailed tax organizers. Run away from tax practitioners promising large refunds without asking you for contemporaneous records, IDs, expenses or receipts.

Never sign a blank tax form!

Reputable practitioners will never ask you to sign a blank form or incomplete statement. Moreover, we strongly encourage you to read carefully all forms, agreements, waivers, affidavits, and all other statements presented to you. If you do not understand the purpose of a particular form or record, do not hesitate to ask. Recall that you are ultimately responsible for the information posted on your tax return and for all other statements filed with the IRS.

Review the entire return before signing it.

Remember that you are also personally liable for the accuracy of your tax return. Therefore carefully review all tax return forms and schedules before signing them out. Always ask for clarification if questions arise. In addition, your tax practitioner is by law obliged to provide you with an exact copy of your tax return before submission. Double-check the copy and the original tax return and make sure the information coincides with your records.

Make sure the practitioner signs the return and includes a PTIN.

Paid preparers must sign the return and enter a Preparer Tax Identification Number (PTIN) on it. The PTIN is a unique number that always starts with the letter P followed by eight digits. It identifies the person who prepares your tax return and is a necessary attribute for all paid tax professionals.

Sign a contract or engagement agreement.

Reputable practitioners will ask you to sign a contract or an engagement agreement to accept you as a client. Though there is no universal format, at a minimum, the agreement should set the obligations of the parties, the fees that apply, and any limitations. When you receive the contract, make sure the terms of the engagement are clearly stated. Keep a copy of the agreement for your personal records for at least three years after the date the tax return was filed.

Don't be afraid to ask questions.

When in doubt always ask questions and inquire for more information. If you need a tax advice, provide all relevant information and seek a reply in writing. A written opinion from a tax preparer is an excellent defense when it comes to the substantiation of your reliance on professional advice. Remember that there is no such thing as a simple tax position or an easy tax question. Be skeptical when the answers to your questions sound too good to be true.

Finally, should you believe your tax preparer violated your rights, acted unethically or improperly, file a complaint directly with the Office of Professional Responsibility. The IRS developed Form 14157 "Complaint: Tax Return Preparer" to document and transmit the complaint. More information is available on the IRS website.