Unfortunately anyone who applies for and receives an IRS issued Preparer Tax Identification number and enters and signs all returns that they prepare can be a paid tax return preparer. The IRS recently tried to initiate competency testing but that effort was struck down in the courts for reasons that this tax preparer doesn’t understand. For 2015 they have instituted a new voluntary program, the Annual Filing Season Program which will be further described in the Qualifications and Credentials section.
In this article I will discuss the considerations that one trying to choose a preparer should take into account. These include qualifications and credentials, types of practitioners, cost, availability, what to do if you have an issue with the preparer that you have chosen, and, finally, whether you need to hire a professional at all. There are a few tax preparation programs on the market that carefully lead you through the process of completing your return.
Qualifications and Credentials
As previously stated there are no qualification requirements to become a paid tax preparer. There are, however, different types of practitioners who have different representation rights for their clients in front of the IRS.
Enrolled Agents – Unlimited Representation Rights
Enrolled Agents are licensed by the IRS, are subject to background checks, pass an examination, and complete continuing education requirements. They may represent their clients in any tax matters before the IRS.
Certified Public Accountants – Unlimited Representation Rights
Certified Public Accountants have obtained a college degree, demonstrated work experience in their particular area of concentration, are licensed by a state board, and comply with ethical and continuing education requirements. They may represent their clients in any tax matters before the IRS.
Attorneys – Unlimited Representation Rights
Attorneys are licensed by a state, have earned a degree, and passed a bar exam. They also must comply with ethical standards and maintain continuing education.
Annual Filing Season Program Participants – Limited Representation Rights
Outside of those mentioned above, Annual Filing Program Participants register with the IRS and must complete continuing education requirements. Their limited representation rights include being able to represent clients for whom they prepared and signed the tax return in question. They may not represent these clients regarding collection issues or appeals.
PTIN Holders – Limited Representation Rights
Prior to the introduction of the Annual Filing Season Program holders of Preparer Tax Identification Number held the same representation rights as the Annual Filing Season Program Participants. Beginning in 2016 the PTIN holders will cease to have representation rights.
Cost
Fees can vary widely depending on the complexity of your return and where you live. A basic tax return should range between $200 and $500. Those preparers from the unlimited representation rights will likely be more expensive than those in the limited representation category, simply due to their potentially more extensive education and experience. This is not meant to imply that you will be getting any less quality from a preparer in the limited representation category.
Be cautious of tax preparers who base their pricing on your anticipated refund. This pricing model has been known to lead to inferior preparation or tax fraud.
Availability
Availability is an important consideration because of the brief filing season. You want to be sure that your preparer is available after filing season in case you have questions or there are problems with your return. When interviewing prospective preparers be sure to be comfortable with their availability after the filing season.
Complaints
Most tax professionals are professional, honest, and trustworthy. However, the IRS is committed to pursuing those who are not. Examples of improprieties can range from embezzlement to making false qualifications claims. Complaints can be made directly to the IRS by, of course, submitting a form. Forms 14157 and 14157-A can be found on the IRS’s website.
Do it Yourself
Finally, there are a number of very easy to use computer programs on the market reasonably priced for the taxpayer who wants to do it themselves. I don’t promote any specific package so do your own research, but most will lead you through an interview that is easy to follow and you’ll end up with a completed return. Most will even allow you to e-file directly from the software.
Tax preparation is serious business so you want to get it right. Also keep in mind that the IRS isn’t in the business of hassling individuals or businesses that make honest mistakes. Amendments are allowed, and although there maybe penalties, if taken care of expeditiously they won’t grow to the monsters of lore.
A good tax preparer will accept responsibility for their mistakes, but remember it is the taxpayer who is providing information to the preparer, so be prepared. Even the best preparers cannot read minds. We can only interview and make suggestions on what we may need based on your responses. If you don’t provide us with the pertinent data we can’t be held responsible, so consider your preparer part of your team. The good preparer will also help you through any post filing questions coming from the IRS or your state department of revenue.
