Sunday, February 27, 2011

How to choose a tax preparer

Choose your preparer wisely. Ultimately the taxpayer is responsible for what's on their tax return even if it was prepared by someone else. Here are some helpful hints to finding a preparer.

Reputation - Ask family or friends. Compile a list of recommended preparers and contact them.

Guidance - Your professional should not only have communication skills to explain different parts of the tax code but should also teach you a little as well. What new changes in the tax law will affect you? Ask their opinions on tax strategies and financial planning.

Integrity - Your preparer should stand behind their work by signing their name to the tax return and providing you a copy. Reputable preparers will request to see your receipts and ask probing questions. They have your best interests in mind and are working with you to avoid penalties, additional taxes, and IRS examinations. A paid preparer is now required by law to sign the return and include their PTIN. The preparer should also give you a copy of the return.

Availability - Make sure your preparer is part of a team and will be open year round to answer questions after the return has been filed. Meet the owner of the firm if necessary. Make sure you can talk with them when you need to.

Experience - Does the preparer have the background to handle your tax situation? Big tax preparation firms hire thousands of seasonal workers that may not have the expertise you're looking for. Find out what education, certification, and research he/she has done during this past year. How often does the preparer attend continuing education?

Service – How long will it take to finish the return? Is the preparer tech-savvy? Does the firm use up to date software? What is the firm's privacy policy? What happens if a client gets audited?

Red Flags - Avoid preparers with tax preparation fee as a percentage of refund or who claim they can obtain larger refunds than other preparers.

Review your return with your preparer and ask questions you don't understand. Tax evasion is a crime punishable up to five years in prison and a $250,000 fine. The taxpayer is legally responsible no matter who prepares the return. You can report abusive tax preparers and suspected tax fraud to the IRS on Form 3949-A.

In addition, the IRS has these suggestions:

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