Ramit Sethi Says This Is Why Hiring the Right Accountant Is Crucial

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  • Hiring the wrong accountant could mean missing out on tax breaks and increasing your chances of getting audited.
  • Make sure your accountant is thorough and isn't too liberal with tax deductions.
  • Also make sure they're willing to sign off on your tax return.

Choosing the wrong professional could hurt you in a very big way.

At this point, many people are scrambling to get their taxes filed. And you may have just hired yourself an accountant to take that task off your plate.

Hiring a professional for tax help is by no means a silly move or waste of money. Often, using an accountant means lowering your chances of making a mistake on your taxes and winding up on the IRS audit list.

Plus, an accountant might alert you to credits and deductions you otherwise wouldn't have known to claim. The result? A higher tax refund or a lower IRS bill.

But your goal shouldn't be to hire an accountant. Your goal should be to hire the right one. Choosing the wrong person to do your taxes could end up hurting you big time.

Be careful with who you hire

One of the biggest tax myths you might fall victim to is assuming that your accountant is on the hook for mistakes made on your return. That's just plain wrong, says financial guru Ramit Sethi.

In fact, on his blog, it says, "It should come as no surprise that accountants get things wrong sometimes. When they do, it could result in an audit for you."

Now there are steps you can take to help ensure that you've hired the right person to do your taxes. One is to ask for their Preparer Tax Identification Number, or PTIN. You can also ask questions about your accountant's experience. If you own a small business, for example, you'll want to work with someone who's filed small business taxes before.

But even if your accountant seems to check off the right boxes, you might still end up with a problem on your hands. So it's important to know what red flags to look out for.

Signs you've chosen the wrong person for the job

If your accountant doesn't get you as large a tax refund as you've been eligible for in the past, that doesn't automatically mean they've done their job poorly. It may be that your income rose or other circumstances changed, resulting in a smaller refund from the IRS.

Rather, a sign that your accountant isn't doing their job correctly is if they push you to claim deductions that aren't legitimate. If you bought a TV for personal use, you shouldn't try to claim it as a tax write-off -- even if you have a receipt for that purchase on your credit card statement. So if your accountant tells you to take that deduction, you may want to terminate your working relationship immediately.

Another big red flag is if your accountant refuses to sign your tax return. Any professional with a PTIN who's paid to prepare a tax return has to sign off on it by law. If yours says they won't, run the other way.

Finally, no matter what type of experience you have with your accountant, Sethi advises to check their work before having your tax return submitted. Just because you're paying someone to crunch the numbers doesn't mean they won't make a mistake. And so it never hurts to review your return thoroughly yourself to make sure everything looks right.

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