How to Pick the Best Tax Preparer
Follow this guide to find tax help you can trust.
This article originally appeared on Money.
Changing tax laws, easy-to-overlook deductions, and the seemingly endless series of tax forms can lead to a lot of confusion come filing time. If you feel like you could use some help with your return, you’re not alone—more than half of taxpayers hire a professional preparer, the IRS finds.
You need to pick your tax preparer carefully, though. You are legally responsible for the information on your return, no matter who helps you fill it out. And you’re trusting this person with your most personal information, including your income, children’s names, Social Security number—all of your financial life.
While many pros provide outstanding service, the IRS receives reports each year of taxpayers fraud. In 46 states, according to a National Consumer Law Center report, hairdressers face more regulatory requirements than tax preparers do. And even honest preparers can get it wrong: In an undercover investigation in 2014, the Government Accountability Office found that only two of 19 tax preparers calculated the correct refund.
Follow MONEY’s four-step guide to finding the tax professional you need.
Step 1: Pick Your Perfect Pro.
There are no federal minimum competency, educational, or professional requirements for tax preparers, says Chi Chi Wu, an attorney with the National Consumer Law Center. All the different types of tax professionals who can help with your return have different expertise and educational requirements. To figure out which type you need, first learn who’s who.
- Certified Public Accountants: A CPA, who must pass a state professional qualifying exam and meet other state licensing criteria, can represent you before the IRS in the case of an audit, appeal, or payment or collection issue. Not all CPAs prepare individual returns, so check first. And ask if he or she is enrolled in continuing education courses. The average cost of having a CPA prep your return was $365 last year, according to the National Society of Accountants.
- Enrolled Agents: Licensed by the IRS, these tax preparers can also represent you before the agency. Enrolled agents must pass a comprehensive exam covering federal tax planning, individual and business tax return preparation, and representation. They must also complete 72 hours of continuing education every three years. Many EAs focus on a particular tax area, so be sure their speciality matches your concerns. You can find an EA through the National Association of Enrolled Agents. These agents will typically be cheaper to use than a CPA, charging an average of $258 in 2015.
- Tax Attorneys: Lawyers, who tend to charge the highest tax-prep fees, according to the National Society of Accountants, should typically be sought out only if you are dealing with a tax dispute, facing a problem from an audit or unclear tax law, or doing tax planning, such as legally sheltering part of your income or estate, says Pewauke, Wi. based financial planner Kevin Reardo. They can also represent you before the IRS.
- Annual Filing Season Program Participants: This voluntary program is for tax preparers who are not attorneys, certified public accountants, or enrolled agents. The IRS issues this title to preparers who complete 18 hours of continuing education courses in preparation for a specific tax year, including a six-hour federal tax law refresher course and test. These professionals cannot represent you before the IRS.
- PTIN Holders: This category includes all other tax preparers who have an active preparer tax identification number from the IRS, but have no professional license and do not participate in the Annual Filing Season Program. These pros, who are authorized to prepare tax returns but cannot represent you before the IRS, may have taken tax preparation courses and earned designations such as an accredited tax adviser (average charge in 2014: $274) or accredited tax preparer ($245).
Step 2: Check Out Your Preparer.
You can use the IRS’s Directory of Federal Tax Return Preparers with Credentials and Select Qualifications to find a preparer in your area with the level of expertise you require, confirm his or her credentials, and make sure he or she has an up-to-date PTIN (anyone who is compensated for preparing a federal tax return must have one).
The IRS also suggests checking for disciplinary actions and the status of any credentialed preparer’s license. You can find both, if your preparer is a CPA, through the National Association of State Boards of Accountancy’s
CPAverify tool. If you are using an attorney, contact the State Bar Association where he practices. For enrolled agents, use this form from the IRS.
Also, be on alert for common red flags, including the boast that a preparer can get you a larger refund then the competition, or a promise of a certain refund without having seen any of your records or previous tax returns, says Wu. And ensure that your refund is deposited directly into your bank account, not into your preparer’s account.
“You want to make sure your refund is obtained legitimately. If you get audited, you are on the hook,” says Wu. “If the return contains fraudulent deductions, there can be serious consequences like being banned from taking the earned income tax credit in future years.”
A good preparer will need to see your records and receipts and ask questions about your finances. He or she should not use your last pay stub instead of your W-2 to complete your return, as this is illegal, says Amelia O’Rourke-Owens, staff attorney for Reinvestment Partners, a nonprofit that provides tax assistance to low-income people and works to end predatory lending practices.
Step 3: Ask About Fees.
The average cost of hiring a professional preparer to file a 2014 return, which included a Form 1040 with Schedule A and a state tax return, was $273, according to the National Society of Accountants.
“Call the place you’re thinking about using and ask about the fees. They should be able to explain the basis of their fee structure, i.e. hourly, flat fee,” says CPA Amy Wang, senior technical manager for the American Institute of Certified Public Accountants. “Tax preparers can give a price estimate after an initial interview, which shouldn’t cost a person anything.”
You may qualify for free IRS-provided assistance if you are in the military, earn $54,000 or less, have a disability, are over age 60, or know a limited amount of English. If you earn less than $62,000, you can also use free tax-prep software to complete your return.
Less reputable tax preparers may base fees on a percentage of your return, says O’Rourke-Owens. but this incentivizes them to increase your refund, sometimes fraudulently.
Step 4: Review Your Return.
Because you are legally responsible for the information on your return, carefully look over the preparer’s work before signing and filing. By law, paid preparers must sign returns and include their PTIN. Be sure you get a copy of your return, and make note of how you can reach your preparer after this year’s April 18 filing deadline in case you run into a problem.
Don’t be afraid to ask your preparer questions if something seems amiss or unclear. And, recommends the IRS, never go with a preparer who asks you to sign a blank tax form or who refuses to submit your return electronically through IRS e-file.