Credit sesame with some tips on finding a good tax preparer.
Income taxes can be the biggest annual bill for an American family, averaging $10,649 in income taxes paid for the 2019 tax year, the most recent year for which data is available. Some families may seek to hire a tax preparer to do the paperwork for them and help lower their tax bill.
Filers in the bottom 50% pay much less — $653 on average for the tax year 2019 according to the Internal Revenue Service data. Those taxpayers represented 3.1% of the total income taxes paid in the U.S.
The other 96.9 percent, the top 50% of filers, paid an average of $20,645 in federal income taxes in 2019.
Whatever your tax bill, a good tax preparer may be able to reduce it. or at least make sure all information is correct. The national average cost for a professional to prepare Form 1040 without itemized deductions is $220, and $323 for an itemized form with Schedule A deductions, according to a 2020-21 survey by the National Society of Accountants. The fees include preparing a state tax return.
Some people find it easy to prepare their annual tax returns. Others may need professional help to get it right. For example, people who work freelance, entrepreneurs who started a business, recipients of inherited money, investors who sold investments, or individuals who received unemployment benefits.
How to find a good tax preparer near you
Ask around
Word-of-mouth recommendation remains a great way to find any service. Whatever type of tax help you need, chances are your family, friends or work colleagues need it too, and some may have found a tax expert who they highly recommend. If you are a freelancer or business owner and you know someone in the same or similar business, ask them who they use.
Check with the IRS
For help finding a tax professional authorized to prepare federal tax returns, the IRS has a free online directory to look up tax return preparers near you. The type of credentials or qualifications a specific person holds can be checked. Bear in mind it is not a comprehensive list and not all tax return preparers are in the directory.
Check credentials of your tax preparer
One of the first credentials to look for is a Preparer Tax Identification Number, or PTIN. This number is only given to tax professionals verified by the IRS. This is a legal requirement for anyone who prepares tax returns for compensation.
However, tax preparers with a PTIN do not have to have any other credentials to prepare a tax return for a client legally. They have no authority to represent clients before the IRS. You may want someone with more credentials and someone who has completed the annual filing season program through the IRS as listed in the IRS database.
Hiring someone who has more than a PTIN can be a good idea if you have to go before the IRS for an audit, payment or collection issue, or an appeal. Certified Public Accountants, or CPAs, and enrolled agents may be best because their licensing requires staying up-to-date on current tax laws and information. Here’s how they differ:
- Enrolled agents: Licensed by the IRS after passing a test on individual and business tax returns, or were previously employed by the IRS. They must complete 72 hours of continuing education every three years. One place to find them is at the National Association of Enrolled Agents.
- Certified Public Accountants: CPAs are licensed by state boards of accountancy, have passed the Uniform CPA Examination, and have completed a study in accounting in college. To maintain an active CPA license they must comply with ethical requirements and complete continuing education. The American Institute of CPAs can help you find one and verify their licenses, and can help find a CPA near you.
Attorneys can also do tax preparation. Another category is called Annual Filing Season Program Participants. This is a voluntary program for return preparers who generally are not attorneys, CPAs, or enrolled agents. It encourages education and filing season readiness, and people who complete it can prepare tax returns.
Questions to ask a tax preparer
Ask a few questions of any tax professional before you hire them.
- Do you have experience working with someone in a similar business or situaion as me?
- Are you licensed to be a tax preparer?
- Do you have a PTIN?
- How long have you worked as a tax preparer?
- What information do you need to prepare my tax returns?
- What do you charge?
- How do I pay you?
- Do you use IRS e-file for returns?
- Can you represent me in front of the IRS if necessary, and is there an extra cost?
- Are you available year-round if the IRS or I have questions later?
- Do you list your PTIN and yourself as my tax preparer on my tax forms?
What to look out for
The last question is important because if they are unwilling to list themselves as your tax preparer on any tax forms you submit, they may not want to be responsible for their work. It is even possible they may be trying to scam you.
Travel agencies, insurance agencies and other small businesses prepare and file taxes for clients, but they must sign their name and PTIN on returns if they are doing business legitimately. If not, then they are ghost preparers who are preparing taxes illegally.
Another red flag is if you’re promised a big refund and are charged fees based on the size of the refund.
Of course, never sign a blank or incomplete return. This is a sure sign of a scammer.
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Disclaimer: The article and information provided here is for informational purposes only and is not intended as a substitute for professional advice.
