What Questions Should You Ask Before Choosing a Tax Preparer?

When you entrust something to someone, be it a cherished heirloom or even the care of your own children, you absolutely do some significant homework to make sure the individual is both capable and responsible.

Why should the preparation of your tax returns be any different?

Here are four critical questions to ask before you hand over the preparation of your tax returns to a third party.

What qualifications or credentials does the individual have?

There are various designations that the IRS recognizes, but when it comes down to it, you may be allowing a third party to prepare and submit your return who has had nothing more than a crash-course in basic tax prep.

Is the individual a CPA or attorney? If so, are they specialized in tax law? A person may be recognized to practice within the broad range of law, but what areas do they focus on, if any? If they are student attorney or CPA, what kind of supervision are they under?

If the person is an Enrolled Agent, then they likely are keenly trained in IRS tax law. Enrolled Agents are the only designation that is under the direct oversight and training of the IRS. Such individuals are recognized to have passed either written IRS examinations, or qualify because of having IRS employment experience.

If the person in an un-enrolled return preparer, they are essentially none of the above but have been authorized onlyto prepare and sign a tax return by the company they are employed with.

If someone seems a little shady, you can run their name or company through the Better Business Bureau and can also check to see if they have been censured or disbarred from practice before the IRS by researching the Office of Professional Responsibility.

How much are they going to charge?

There are fees associated with tax preparation, and additional fees may apply for having your return electronically filed to the IRS.

Before you pay anyone anything, be sure to check out the IRS FreeFile and e-File programs. Both links are available on the IRS home page.

If your income is under a certain amount, not only will you qualify for free tax preparation through a number of reputable companies that the IRS partners with year to year, but your return will also be filed securely and electronically for free as well.

Do they provide any kind of guarantee?

Large tax preparation firms generally have various guarantees, meaning that if they make an error, they will also correct it for free.

However, you need to find out the specifics on the guarantee. Are they also going to reimburse you for all or a portion of any penalty or interest the IRS has assessed because of their error? Or does the guarantee only mean they will fix the return without charging you again?

What are they asking you to do?

If a preparer ever asks you to leave your information with them and sign a blank return, immediately find another preparer. This type of action on the preparer's part ranges from careless to potentially fraudulent.

A competent preparer will ask to see all of your tax records, go over all possible deductions and credits that you may be eligible for, and walk you through each line, explaining anything that you do not understand.

Finally, ensure that your preparer signs the return on the space designated for him or her and provides you with a copy. Check as well to see if the return has been annotated with their PTIN (Preparer Tax Identification Number), a number now required to be on all returns prepared and submitted to the IRS by tax preparers.