The tax code is complicated, so much so that you may be thinking of hiring a tax preparer to help with your upcoming return. If your tax situation is fairly simple -- you only have one job, and you're claiming the standard deduction -- then you can probably manage to file your taxes yourself. But if you're self-employed, own a business, or have numerous deductions to claim from a variety of sources, then you may be better off outsourcing your return to someone who understands taxes better than you do.
At the same time, you don't want to hire the wrong tax preparer and regret it after the fact. Here's how to know when the person you're thinking of trusting with your taxes may be a glaringly wrong choice.
1. Your tax preparer doesn't have a PTIN
The IRS requires all individuals who get paid to prepare taxes, or assist with tax preparation, to have a preparer tax identification number, or PTIN. This regulation has been in place for quite some time, so if the person you're thinking of hiring doesn't have one, look for someone who does.
2. Your tax preparer promises you a refund
While it's true that the majority of people who file a tax return wind up with a refund, that doesn't mean you're guaranteed to get one. And any tax preparer who promises to get you a refund, or a big refund, should be avoided. Your eligibility for a refund will depend on how much tax you paid during the year, how much you earned, the tax bracket you fall into, and the deductions you're entitled to claim. Without reviewing your tax details thoroughly, there's no way a preparer can legitimately promise a refund.
3. Your tax preparer's fee is a percentage of your refund
Some tax preparers charge a flat fee for completing a return. Others charge by the hour, and if your tax situation is complex, you may be looking at this type of arrangement. But one arrangement you shouldn't agree to is paying a fee based on a percentage of your tax refund. If that's how your tax preparer makes his or her money, then there's a good chance he or she will be tempted to take liberties with your return to snag a higher rate, and that's not what you want. Also, you could wind up paying more money than necessary to have your taxes done if you agree to fork over a percentage of your refund, and that refund is substantial.
4. Your tax preparer doesn't provide audit support
Having a professional prepare your taxes could lower your chances of an audit -- but it doesn't guarantee that you won't make the IRS's list. As such, you should look for a tax preparer who offers audit support as needed, and steer clear of anyone who won't agree to be there for you if the IRS comes asking questions.
If you're going to spend money on a tax preparer, it's important that you choose the right person for the job. If any of these red flags pop up in your search, run the other way and find someone else. In fact, your best bet in finding a tax preparer is to talk to the people you know and solicit recommendations. Chances are, if someone you trust has had a good experience with a certain tax professional, you'll likely have the same.