Tax season is here, but many people lack the time, the confidence -- and frankly, the interest -- to do their taxes on their own. So instead, they hire a professional to do the work for them. All they have to do is hand over their documents, pay the fee, and sit back and wait for their refund.
That's a valid way to do your taxes, but that doesn't mean you can afford to be completely hands-off. Tax professionals vary in their experience levels and meticulousness, so you must choose yours carefully. Here are five questions you should ask before you hand over your tax documents.
1. What's your Preparer Tax Identification Number (PTIN)?
Everyone who gets paid to help someone else prepare and file their tax returns must have a Preparer Tax Identification Number (PTIN) from the IRS and must include this number on every return they help file. Most tax preparers you'll find will have one of these, but it's important that you check to make sure. It's rare, but some identity thieves pose as tax preparers, artificially inflate your return by claiming deductions and credits you don't qualify for, and request a portion of your refund as payment for their services. Then, they skip town, leaving you to deal with the fallout from the IRS.
Verifying that your tax preparer has a PTIN ensures that you're working with a legitimate person who is qualified to assist you with your taxes. You can locate legitimate tax preparers in your area by entering your zip code into the IRS's Directory of Federal Tax Return Preparers with Credentials and Select Qualifications.
2. What are your credentials?
You don't actually need any credentials or special training to legally work as a tax preparer. But if you want to feel confident that your taxes are done correctly, you're better off working with a professional who has a detailed understanding of the tax code and significant experience helping others prepare their taxes.
Look for a tax preparer who is a Certified Public Accountant (CPA), an enrolled agent (EA), or a licensed attorney. All of these statuses require the individual to undergo training, pass an exam, and take continuing education courses to ensure that their knowledge is up to date. You can see which credentials the tax preparers in your area have by looking them up in the IRS's directory.
3. How do you determine your fees?
Tax preparers charge for their services, but how they structure their fees can vary. Most will charge an hourly fee. This way, those with relatively simple taxes will pay less while those with more complicated taxes will pay slightly more. If your tax preparer charges an hourly rate, they may not be able to tell you exactly how much you'll owe right away, but they should be able to give you a pretty close estimate. Make sure you're comfortable paying this before you decide to work with the tax preparer.
Be wary of tax preparers that charge you a portion of your return. This makes it virtually impossible to estimate the cost of their services beforehand, and as I mentioned above, it's a common tactic employed by scammers.
4. When will I receive a copy of my tax return?
Check with your tax preparer to see when they plan to finish your taxes. If they can't give you an answer, that could be cause for concern, especially if you anticipate owing money this tax season. If your tax preparer doesn't file your return before the Apr. 15, 2020 tax deadline, the government could charge you a failure-to-file and a failure-to-pay penalty, which could cost you 5% of your tax bill for every month that your return is late.
Stay away from any tax preparers who don't plan to give you a copy of your tax return at all. You will need a copy of your return for your records and if your tax preparer is hesitant to give one to you, that could indicate they're trying to hide something.
5. What will you do if I get audited?
CPAs, enrolled agents, and attorneys can represent you in front of the IRS if you're audited, and they can assist you with fixing any mistakes, if need be. Hopefully you won't have to worry about audits, but you should understand what kind of assistance you can expect in that scenario. You should also find out if the tax preparer will be available to answer questions if you have any concerns about your tax return after it's filed. Avoid tax preparers who try to completely wash their hands of you once they've collected their fee for filing your return.
These five questions can help you choose a legitimate tax preparer, but you don't have to stop there. If you have any questions about their services or what they need from you, don't hesitate to ask. It's your money on the line, so you want to make sure it's in the right hands.