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Know Who’s Preparing Your Taxes
February 24, 2015
As you find yourself in the middle of income tax filing season, it is important to know the individual you entrust to handle your personal financial information. A good preparer chosen up front can help
eliminate headaches with the Internal Revenue Service down the road. Tax professionals have differing levels of skills, education and expertise. This article will help you understand these differences when making your selection.
Enrolled Agent (EA). An enrolled agent is an individual licensed by the Internal Revenue Service and works exclusively with tax related issues. An EA must complete a 3-part comprehensive exam and complete a minimum of 72 of continuing education every three years. You can find your local EA at www.naea.org and click on “Find an EA”.
CPA. A Certified Public Accountant (CPA) is licensed by their respective state boards of accountancy and complete education requirements as well. CPAs may offer a wide range of services including both tax preparation and planning.
Attorneys. Attorneys are licensed by their respective state bars or courts and have on-going educational requirements. Attorneys may also offer a vast array of legal services in addition to tax preparation and planning as well.
Enrolled agents, certified public accountants, and lawyers have unlimited representation rights before the IRS. Tax professionals with these credentials may represent clients (theirs or someone else’s) on any matters including audits, payment/collection issues, and appeals.
In addition, individuals may prepare their own return, purchase a point of sale software, or choose a commercially advertised tax preparation service.
When searching for a preparer, ask friends, family members, and co-workers for a referral. Remember, cheaper is not always better, especially with a complex matter such as the sale of property, 1099-Miscellaneous income, or the Obamacare penalty. Look for a preparer who is available year round, not just at tax season. Avoid preparers who “guarantee” the maximum refund. Every taxpayer’s situation is different.
A good preparer will take the time to listen and ask questions, LOTS of them in some situations. Be honest and upfront. Let your preparer know if you’ve defaulted on student loans, owe the IRS back taxes from prior years, or haven’t filed a tax return in a number of years. Be open and ask questions about the write-offs you want to take for your self-employment. A good preparer will also ask to see those receipts.
As the client, you are paying for a service. Don’t be afraid to ask questions to clarify an item on your tax return. After all, you are ultimately responsible for every item on the return.
Before you leave your preparer’s office, you should receive a copy of your tax return signed by the person paid to prepare it. If the preparer gives you an unsigned copy or refuses to complete the paid preparer section of your tax return, choose another preparer.
Choose a preparer that is right for you. Be open and frank about your tax situation, good or bad, and be sure to ask questions about things you don’t understand. The preparer you choose should be someone you trust and can build a good working relationship year after year.