- Do you have a PTIN (preparer tax identification number)?
This should be your first question. Anyone who prepares federal tax
returns for compensation must have a valid 2014 PTIN before preparing
returns. Without a PTIN, the preparer is not allowed to prepare your
return – this isn’t something you want to find out at the end.
- What is your tax background? A slew of letters following a name on a business card doesn’t necessarily mean more qualified. It can
mean that the person has passed certain tests or has specific tax
training. So ask what those letters mean – and how they would relate to
the preparation of your return. Don’t be blinded by the alphabet soup.
Here’s a quick guide to help you sort it out in advance:
- A certified financial planner (CFP®) is a designation for financial planners given by the Certified Financial Planner Board of Standards.
A CFP must meet certain education requirements, pass an exam, have
experience in the field, pass fitness standards and pay a certification
fee: the coursework and exam do have tax and tax planning components as
determined by the Board. A CFP may have tax experience but tax may not
necessarily be the focus of their practice.
- A certified public accountants (CPA) is certified by the state to
act as a public accountant. A CPA is the only licensed qualification in
accounting. To be certified, candidates are required to pass an exam.
Most states also require an ethics exam or course as well as continuing
education credits. A CPA may specialize in tax but not necessarily:
there’s a wide range of CPA services including accounting, auditing,
financial planning, technology consulting and business valuation.
- An enrolled agent (EA)
has earned the privilege of representing taxpayers before the Internal
Revenue Service by either passing a three-part comprehensive IRS test or
through experience as a former IRS employee. EA status is the highest
credential the IRS awards. EAs must adhere to ethical standards and
complete 72 hours of continuing education courses every three years.
- A JD is a law degree. An LLM is a Masters in Law – it could be in
taxation but other areas of the law also offer an LLM. As with a CPA,
candidates are required to pass an exam, an ethics exam or course and
take continuing education credits. Having a law degree or two doesn’t
necessarily mean that an attorney prepares returns. For example, I have a
J.D. and an LL.M. Taxation but I no longer prepare returns: I do
planning and focus on areas of tax compliance. Other lawyers might have
very little in the way of tax experience (you don’t have to demonstrate
competence in tax law to pass the bar in most states). Avoid a lawyer
who promises to do your taxes, get you out of that DUI and help you with
your divorce: it’s all too much.
- A Volunteer Income Tax Assistance (VITA) volunteer is trained by the IRS to prepare basic returns.
- Other accountants, bookkeepers and tax preparers may be able to
demonstrate competence but may not have formal credentials. That doesn’t
mean you shouldn’t give them a look. Ask about what they do and why
they’re qualified to do it.
- A certified financial planner (CFP®) is a designation for financial planners given by the Certified Financial Planner Board of Standards.
A CFP must meet certain education requirements, pass an exam, have
experience in the field, pass fitness standards and pay a certification
fee: the coursework and exam do have tax and tax planning components as
determined by the Board. A CFP may have tax experience but tax may not
necessarily be the focus of their practice.
- Have you prepared a tax return before for (fill in the blank)?
Remember when I said that there’s no one size fits all in this
business? That’s because tax returns are not all the same. Some tax
preparers can do forms 1040-EZ in their sleep. Others are fluent in
Schedules C (business) and/or E (rentals). Some may focus on
pass-through entities, tax exempt organizations or fiduciary returns.
Tax preparers may focus on international taxpayers or small businesses.
There are as many variations as there are schedules and forms. It’s not
uncommon for tax preparers – especially those that have been around for
awhile – to have a pretty wide scope of knowledge. But nobody can do it
all and don’t trust anyone who tells you otherwise. If you have special
circumstances because of your investments, occupation or residency
status, find a tax preparer who has experience with your specific
situation.
- Do you know the requirements of the states and localities where I am required to file?
Yes, federal income taxes know no boundaries – those rules don’t change
from one state to the next. But that’s not true when it comes to states
and localities. Your state or locality may have quirky filing
requirements, especially for business owners. It can get even more
complicated if you’ve moved from state to state during the year or if
you live in one state and work in another. You may also need special
guidance if you own a business or real estate in a state outside of your
residency or if you are the beneficiary of a trust or estate in another
state. Make sure that your preparer knows – and can handle – all of
those filing requirements.
- What records and other documentation will you need from me?
While you shouldn’t be expected to haul in the contents of your entire
home office, a reputable preparer should insist that you provide your
forms W-2, 1099, 1098 and other verification of income and expenses in
order to prepare a proper return. You shouldn't use a preparer willing
to e-file your return just by using a pay stub (that’s against IRS rules).
A tax preparer should be able to explain what will be needed for
special schedules, forms or circumstances. If a preparer isn’t inclined
to do the necessary due diligence (especially for something like the
Earned Income Tax Credit) in the beginning, it should give you pause
about what other corners the preparer might be willing to cut later – at
your expense.
- How do you determine your fees? Note the wording on this one. I didn't say ask how much
the fees would be, rather I said ask how the fees are determined.
Prices may vary based on the complexity of your return, whether you
require additional schedules (such as dividend and interest on Schedule
B, business information on Schedule C, capital gains and losses on
Schedule D and/or rental income and losses on Schedule E); supporting
forms (such as those for the child tax credit or additional charitable
donation information); or whether your return has “out of the ordinary”
line items (like Roth IRA conversions or homebuyer credit
repayment). Avoid preparers who base their fee on a percentage of your
anticipated refund: they have a financial incentive to encourage
inappropriate credits and deductions.
- Can I file electronically? More than 1 billion
individual tax returns have been processed since the debut of electronic
filing in 1990. It’s the fastest way to get your refund and tends to
result in fewer math errors. It may also be required: a paid preparer
who prepares and files more than ten client returns must file
electronically unless the client opts out.
- Who will sign my return? This is a biggie.
Remember that your preparer must have a PTIN (see again #1). The PTIN
and the preparer’s signature need to appear on your tax return. Don’t
trust a preparer who refuses to sign a return. And be wary of any
preparer or service who won’t tell you in advance who will actually be
preparing the return.
- When will I receive a copy of my return? It’s not
unreasonable to leave your preparer’s office without a copy of your
completed return; assembly may be required. However, you should receive a
complete copy of your return within a reasonable amount of time
following your appointment. If your preparer can’t offer a window of
time to expect the copy, it might be indicative of a time management
problem. If your preparer can’t promise you a copy at all, run, don’t
walk away: you will need a copy for your own records.
- How do I find you if I have a question or a problem after tax season is over?
I’m not a fan of those tax preparation shops that pop up on street
corners during tax season and then go missing for half the year. Clients
often receive requests from taxing authorities for additional
information in October or November and can no longer locate their tax
preparer. Make sure that you know how to contact the tax preparer after
your return has been filed. If your tax preparer won’t be around,
consider taking your business elsewhere.
- What happens if I get audited? Nobody wants to
think about an audit when filing a return. But you need to ask about it
now so that you don’t end up in a pickle later. Find out how the tax
preparer handles audits or examinations from IRS: will he or she respond
to those questions? Represent you in front of IRS or Tax Court?
(Remember that not all tax preparers are allowed to represent clients
before the IRS or in court.) And what about the cost to fix any
mistakes? How is that calculated?
I know. It looks like a long list. But most of these questions require pretty simple answers. And better to ask now than later, right? Choosing a good tax preparer does require a little bit of research and effort on your part but it’s worth it. And admit it: you asked at least these many questions when finding a hair dresser or a pediatrician. Just as you stick with other professionals from year to year, the goal here isn’t just to fill out a form but to create a relationship. A good tax preparer won’t mind answering your questions.
(Forbes)
Feel free to contact us to speak with one of our Licensed Tax Preparers, CPAs, and Enrolled Agents today!
North Sound South Sound
2802 Wetmore Ave, Suite 212 33530 1st Way S, Suite 102
Everett, WA 98201 Federal Way, WA 98003
425.339.2400 253.237.0751
fax 425.259.1099 fax 253.237.0701
No comments:
Post a Comment