CHICOPEE, Mass. (WWLP) – As the submission of income tax forms comes up in April, you might be in search of someone you can trust with your finances and sensitive personal information.
Understanding the different types of tax preparers’ qualifications will help narrow your decision. Those who can represent you to the IRS on matters like audits, collection issues, and appeals are only enrolled agents, certified public accountants, and attorneys.
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Different types of tax preparers
According to the Better Business Bureau (BBB), these are the tax preparers you can refer to:
Enrolled Agent (EA): An EA is a tax preparer that has been approved by the IRS to represent taxpayers. An EA must either have prior qualifying employment with the IRS or pass an intensive two-day exam on federal taxation and complete a background check. To maintain EA status, they must complete a specified number of credit hours each year of continuing education in accounting methods and tax regulations. An EA may work independently or as part of a firm and specialize in specific areas of tax law. An EA is a good option if you have a more complex tax situation. However, you’ll want to make sure their area of expertise applies to your personal situation. Fees and availability may vary, but you can expect an EA to charge less than a CPA. An EA is also qualified to help you with financial planning and give you tips that could help you reduce your taxes in the future.
Certified Public Accountants (CPA): CPAs have a college degree (or the equivalent in work experience). They are licensed after passing a state professional qualifying exam. They are highly skilled in accounting. This makes them good candidates for complex tax planning and preparation if they are experienced in handling tax matters and enrolled in continuing education programs that keep them abreast of the constant changes to tax laws. If your return is quite complex, a CPA may be your best choice for tax preparation, but keep in mind they will charge much more than basic tax preparers.
Attorneys: Tax attorneys often charge the highest fees as tax preparers. For taxpayers looking to shelter part of their income legally or for those who need specialized advice on municipal bonds, estate planning, and the like, hiring a tax attorney is a good option.
Non-Credentialed tax preparers: There are about 700,000 people who work as non-credentialed tax preparers in the United States. They often work part-time or only during the tax season. These preparers must have an active preparer tax identification number (PTIN) through the IRS, but beyond that, regulating tax preparers is done at the state level. In the vast majority of states, anyone can prepare tax returns for others without having to take an exam, get a license, or comply with other government regulations. Learn more about your state’s requirements here. Read more about “ghost tax preparers” here. Most tax preparers are legitimate and competent, but keep in mind that without a national license requirement, they may be working off of their own personal research and experience. Because of this, it is important you conduct a thorough interview with the tax preparer before you hire them.
Choosing the right tax preparer
The BBB recommends the following steps to find a tax preparer that is right for you. When making a decision, it will depend on the complexity of your tax situation.
Review the tax preparer’s credentials. EAs, CPAs, and tax attorneys are all qualified to represent their clients to the IRS on all matters. Other preparers can help you with forms and basic matters but cannot represent you in case of an audit. Don’t be afraid to ask about these or other qualifications before you hire someone.
Be wary of spectacular promises. If a tax preparer promises you larger refunds than the competition, this is a red flag. Many such tax preparers base their fees on the amount of your return and may be likely to use shady tax preparation tactics. In addition, it’s wise to avoid tax preparers who offer “refund anticipation loans” as you’ll probably lose a large percentage of your return to commission fees.
Get referrals from friends and family. One of the best ways to find a trustworthy tax preparer is to ask your loved ones for recommendations. Once you have a few options, check BBB.org, paying careful attention to other consumers’ reviews or complaint details. This will give you a clear view of what you can expect.
Think about availability. If the IRS finds errors in your tax forms or decides to perform an audit, will your tax preparer be available to help you with the details? Find out whether you can contact the tax preparer all year long or only during tax season.
Ask about fees ahead of time. Before you agree to any services, read the contracts carefully and understand how much the tax preparer charges for their services. Ask about extra fees for e-filing state, federal, and local returns, as well as fees for any unexpected complications.
If things don’t add up, find someone else. If a tax preparer can’t verify their credentials, has a record of bad reviews from previous clients, or their business practices don’t seem convincing, don’t do business with them. Remember that if you hire them, this individual will handle your sensitive personal information – information you need to keep safe from corrupt or fraudulent tax preparers.
Researching your tax preparer is just one of many ways to avoid identity theft. BBB says it is best to file early and use the IRS’s Identity Protection PIN. Along with protecting your social security number and using an identity protection PIN (IP PIN).
Some other red flags to keep in mind from BBB:
If a written notice from the IRS arrives in the mail about a duplicate return, respond promptly.
If an IRS notice arrives stating you received wages from somewhere you never worked, or receive other notices that don’t actually apply to you, contact the IRS office immediately.
If you receive a notice that “additional taxes are owed, the refund will be offset or a collection action is being taken against you for a year you did not file a tax return” (IRS).
Contact the IRS if you have any suspicions that your identity has been stolen.
IRS begins the 2023 tax season and starts accepting and processing individual 2022 tax returns on January 23rd. The IRS says you can start expecting refunds starting February 28th. Most tax refunds will be issued within 21 days after filing. The last day to file taxes is April 18th.