1. Start with the PTIN
Find out if your tax advisor has a Preparer Tax Identification Number (PTIN). This is an IRS requirement for anyone who gets paid to prepare tax returns. Volunteers don't need a PTIN, but if you're paying someone to handle your taxes, ask for their PTIN.
On top of that, you need to make sure your preparer signs your tax returns and provides their PTIN on the tax form.
2. Check qualifications
Next, find out what qualifications your tax advisor has. There are a number of qualifications tax preparers can receive. Some of the designations to consider include:
- CPA
- Law degree (emphasizing tax law)
- IRS Enrolled Agent
- Completion of IRS Annual Filing Season program
These show that your tax preparer has been through a course of study designed for tax returns.
You can also get an idea of the level of professionalism by checking for membership in various organizations. For example, your tax preparer might be a member of the American Institute of Certified Public Accountants or the National Association of Tax Professionals. In order to belong to such organizations, your tax preparer needs to meet certification requirements.
3. Consider experience
Of course, a string of letters behind a name isn't everything. When finding the right tax professional for you, don't forget about the experience. Maybe someone is a CPA, but they just finished school and don't have a lot of practice with tax returns.
But it's about more than just the amount of time spent preparing tax returns. The type of tax return also matters. My tax professional has more than 20 years of experience preparing tax returns, but he also specializes in tax returns for freelancers.
If you have specific needs, choose a tax professional who has experience in these areas. These might include such things as being a small business owner or having complicated investments. The type of experience your preparer has can allow them to prepare your return more accurately. And they'll know to watch for common issues that might escape your notice.
And while volume isn't everything, it does matter a little bit. You don't want someone who's going to be overwhelmed and overworked and more likely to make mistakes. But at the same time, it can be reassuring to have a professional who has a good amount of experience and does a reasonable amount of business.
4. Ask about price
A tax advisor might not know exactly how much your tax return will cost until he gets into it. But they should be able to give you a pretty good idea of what to expect. Many tax preparers have standard prices for individual tax returns — for example, a set amount for preparing 1040 with a Schedule A, and a price for preparing K-1 forms or other business tax returns.
According to the National Society of Accountants, the average fee for an itemized Form 1040 with Schedule C and a state tax return is $457.
If you have a rough idea of what you'll need regarding having your taxes completed, a tax professional should be able to give you a ballpark figure. It can also help to bring in your previous year's tax return. When your tax preparer has an idea of what you need, they can provide you with a more accurate quote.
5. Look for e-filing
If your tax advisor doesn't offer e-filing services, that's a red flag. If a paid tax preparer does more than ten returns, they must offer e-file through the IRS system. So if your tax professional doesn't offer e-file, they might not be handling very many tax returns — and may be low on experience. Besides, e-filing is convenient.
And to help you get your refund faster, receive your refund through direct deposit.
6. Find out about representation to the IRS
If you're audited, will your tax preparer represent you to the IRS? This is a crucial detail to find out if you're looking for the right tax professional. You should also look for someone who can handle issues with state tax returns.
My former accountant made a mistake on a state tax return a few years ago and wasn't interested in representing me to the state or helping me fix the problem. By contrast, my current tax professional handled an issue that arose with the IRS, quickly taking care of the problem and showing that he has my back.
Ask your tax preparer what issues they can represent you on. Not every certification has the ability to represent you in every case. If you want maximum representation with the IRS, look for someone with a PTIN who is also an attorney, enrolled agent, or CPA.
7. Ask if they offer year-round tax planning help
Finally, find out if your tax professional offers year-round tax planning help. Many tax professionals will sit down with you after finishing your tax return and give you some helpful tax hints for the coming year, free of extra charge.
However, it can sometimes be worthwhile to get year-round help — even if it costs a little extra. Some tax preparers can help you manage payroll. And some may be willing to review your situation throughout the year to see if there are things you can do to be more efficient with your taxes as you move forward. This is a helpful service that can keep you on track all year. That way, you aren't scrambling to find deductions and credits and take last-minute actions at tax time.
Bottom line
The right tax advisor can help you navigate your taxes by providing you with timely advice and accurate tax return preparation. When you have complicated taxes, your relationship with your tax professional is especially important.
If you're looking to save time on finding a tax pro, you may want to look for tax software companies that provide access to them. H&R Block customers, for example, can add “Online Assist” to their software purchases to receive live help from tax experts. There's also a “file with a tax pro” option with H&R Block that offers full-service tax prep from experts, with or without an office visit.
Remember: You're letting a tax professional deep into your life. They'll have all sorts of financial details, as well as personal information. Go through the process of vetting your tax preparer so you can be reasonably confident that they'll do accurate, timely work — and have your back when the IRS comes calling.
