All tax preparers must be registered with the IRS, but they're not all created equal: experts recognize certified public accounts (CPA), enrolled agents (EA), and attorneys as the most trusted way to go because of the depth of their education and training. Here are a few tips on how to find a good CPA or tax preparer:
Start your search right. With more than 700,000 registered tax preparers with the IRS, narrowing the field can be daunting.
- Use your network. Start with recommendations from friends and family. Begin your search through someone you know and trust, suggests the American Institute of Certified Public Accountants, an accounting association that sets ethical standards for the profession
- Make the first move. Call to see which tax preparers/CPAs have the experience that matches your needs. A salaried worker with one W-2 may not need the expertise that, say, a new business owner does.
- Check out their qualifications. Look for credentials in accountancy and taxation or credentials as a CPA or an enrolled agent (another type of federally-recognized tax preparer). The National Society of Accountants and the American Institute of CPAs each have an online directory of professionals to help get you started.
Get the profile. The Accreditation Council for Accountancy and Taxation has a list of questions people should ask of professional in their search.
- Audit experience? Ask if they have experience representing taxpayers before the Internal Revenue Service. Attorneys, enrolled agents, and CPAs are all able to represent you in an audit.
- Tax specialty? Just because the tax pro has prepared corporate tax returns, doesn't necessarily mean he's done your specific kind. Good questions to ask: What types of clients do you have? Do you have a particular specialty? What's your expertise?
- Fee structure? Some CPAs charge by the hour, some by the types of forms. Others provide a price range that's dependent on the complexity of your situation. Ask for an engagement letter that outlines the services and anticipated fees.
- Availability? Make sure your tax professional is reachable year-round, not just seasonally, in the event that your situation changes or you get a letter from the IRS post-tax season.
Profile the firm. A tax preparer's firm is like family, and experts say you want to know as much as you can about them as well.
- Consider your needs. See which firms have specialties that most closely match your tax prep needs. Take into account any financial or retirement planning services that are important to you.
- Dig deep. Research a firm's track record with the local Better Business Bureau, as well as state boards of accountancy. (Insert your zip code at BBB.org to find your local Better Business Bureau, or click here to contact the board of accountancy in your state.)
- Find out how the firm works. Does the tax professional you intend to hire do all the work or does someone else actually do the work?
What not to do. Sure, you may want to get your taxes done quickly and painlessly, but don't make the following errors in haste:
- Don't commit to contingent fees. A contingent fee is when a tax preparer charges you based on a percentage of your return and experts say to avoid preparers who offer this. The AICPA says such fees are occasionally ethical for CPAs, but recommends sticking to a structured fee instead.
- Don't procrastinate. Start your search early, not just for a tax preparer but also in pulling your paperwork together. A tax preparer can often provide a tax organizer, which outlines what the tax pro will need to prepare your return. If your pro charges by the hour, being organized may also help you avoid higher fees.
- Don't file blind. By law, a paid tax preparer has to sign your return. But ultimately, you're responsible for the accuracy of your return, so before you sign off on the tax preparer's work, review the return and all the forms carefully (See this IRS notice).
For further reading:Mymoney.gov is a financial literacy site by 22 federal entities with information ranging from planning for retirement to scams and fraud.Taxpayer Advocate Service is the taxpayer's voice at the IRS and, as an independent organization within the IRS, has lots of individual taxpayer information, .
The Accreditation Council for Accountancy and Taxation has a great, expanded list of questions you should ask of a professional in your search. 360taxes.org, by AICPA, has a helpful page devoted to choosing a tax preparer here. And here are details on the new rules that the IRS will begin enforcing on tax preparers.