The decision to find the perfect tax preparer or tax preparation company rests solely in your hands. You can ask for recommendations and suggestions from your family and friends, but they cannot choose a tax preparer on your behalf.
Preparing taxes does not work on the one-size-fits-all concept as requirements vary from person to person. The key to finding a perfect tax preparer is to ask relevant questions, including the pricing. Here are seven questions that you should ask a tax preparer or a tax preparation company before hiring them.
7 Questions to ask a Tax Preparation Company or Tax Preparer:
1. Does the Tax Preparer have a Preparer Tax Identification Number?
Inquire if the tax preparer assigned by the tax preparation company to do your taxes has a PTIN or Preparer Tax Identification Number. Even if you hire an independent tax preparer, don’t hesitate to ask him/her to show you their PTIN so as to avoid any legal complications in the future. It is necessary for a tax preparer filing federal tax returns to have a valid 2014 PTIN before they prepare or submit the taxes. It is against the law to prepare tax returns without a valid PTIN and this can work against you in the future.
2. What is the Background of the Tax Preparer?
A bunch of reference letters do not ensure the right qualifications for a tax preparer. No matter how well a person prepares the taxes, there are some qualifications that are mandatory for submitting some of the filings. Here is a comprehensive guide to help you choose the right tax preparer easily:
- Certified Financial Planner (CFP): This designation is bestowed upon financial planners by the Certified Financial Planner Board of Standards. While a CFP can come with federal tax filing experience, it may however not be the focus of their practice.
- Enrolled Agent: One of the major privileges that Enrolled Agents enjoy over others is the power to represent taxpayers in front of the Internal Revenue Services (IRS) in case of tax audits. The designation of the EA is the highest credential that the IRS awards.
- Certified Public Accountants: Certified Public Accountants function as public accountants after being certified by the state to perform that role. As a matter of fact, only CPAs receive a licensed qualification for accounting. Apart from doing taxes, a CPA can carry out many other services like financial planning, auditing, accounting, business valuation, technology consulting, and many more.
- Volunteer Income Tax Assistance (VITA): VITAs are trained by the Internal Revenue Services to prepare basic and simple tax returns for taxpayers.
3. Does the Tax Preparation Company have Prior Experience?
While some tax preparation companies offer all kinds of tax services under the sun, there are many who have experience only with a select few services. While some tax preparation companies have years of experience in doing 1040-EZ forms, others can be more adept at filing Schedules E (rentals) and/or C (business). Yet others may focus on fiduciary returns, pass-through entities, and tax-exempt organizations. Therefore, nobody can do it all. You will have to find a tax preparer or tax preparation company that is highly experienced in filing the types of returns that you need the most.
4. Does the Tax Preparer have Knowledge of Local and State Laws?
While the general rules for federal income taxes do not change from one state to the other, the filing requirements might change depending on the locality and state. In case the state in which you have a business is different from the state where you reside, you might need special guidance from the tax preparers to file tax returns for the same. In that case, ensure that the preparer is aware of the filing requirements of both the states.
5. What are the Necessary Records and Documentation Required?
The right documents and records are necessary to file the taxes and your tax preparer must be aware of the documents that the taxpayer needs to submit for proper filing. If the tax preparation company is skilled and experienced, they will insist you submit forms 1099, W-2, and 1098, among others to provide substantial verification of expenses and income.
If a tax preparer is willing to file your returns just by using a stub, which by the way is against the rules of the IRS, then it’s better to choose someone else. A competent tax preparation company will be able to tell you exactly what is needed – forms and schedules – to submit a proper tax filing.
6. Who Will Sign Your Return?
This is a very important thing to consider. It is mandatory for the signature and PTIN of the tax preparer to appear on the filing. If a tax preparer refuses to put his/her PTIN and/or signature on the filing, then it is better to choose someone else. Also ensure who exactly will be preparing the returns.
7. When Will I Receive a Copy of my Tax Returns?
Ask your tax preparation company by when you will be able to collect the copy of your tax returns. Most of the time, the taxpayer is handed their copy immediately after filing. However, there might be a small delay as well. Ensure that you ask for a specific date when you can expect to get your tax return copy. If the tax preparer refuses to commit to a certain date, understand that there might be a problem in the management. However, never go back without a copy of your returns.
While this might look like a long list, the questions are quite simple, straightforward, and important. Choosing a tax preparer requires some quality research to ensure that you do not regret your decision later. It is the same as choosing a doctor – one mistake can cost you a lot of money and time. Choose a capable and qualified tax preparer who will be able to provide clear and concise answers to the questions listed in this article.