To start I need everyone to know the goal is to owe nothing and receive nothing.
Because if you owe something then you haven't been paying enough and the Internal Revenue Service (IRS) could add penalties and interest to what is already owed.
You don't want the IRS to owe you because that usually means you overpaid and gave them an interest-free loan and you could have been doing something much better with your money. Like starting a business, investing in the stock market, or just putting your money in a high yield savings account earning interest to name a few.
Now that we understand the goal, lets talk about who is handling your taxes?
Did you know the IRS created a list of tax scams to watch out for? This list includes preparer fraud, fake charities, phone scams, and identity theft. Tax scams are on the rise and unfortunately, it doesn't take much to become a paid tax preparer because most states have very few requirements for tax preparer training and/or certification.
Knowing this, here are some tips to find a tax preparer. Note: A Certified Public Accountant or Enrolled Agent is recommended depending on your situation. I recommend them because:
CPAs are licensed accounting professionals committed to protecting the public interest. To earn the CPA license, accounting professionals must have extensive education—at least 150 hours—pass a rigorous four-part exam and meet experience requirements. They must also commit to lifelong learning and adhere to a strict Code of Professional Conduct that requires competence, objectivity, integrity and independence.
Enrolled Agents are usually people who have worked for the IRS and know the ins and outs of what the IRS is looking for because they once worked on the other side (the IRS dark side). They've passed rigorous testing and background checks administered by the IRS and are usually great if you have tax complex issues because they can represent you before the IRS if you're faced with an audit or collection actions.
Tips for whoever prepares your taxes:
1. Get referrals. Everyone has to get their taxes done (or should) and the majority of people don't handle this themselves so ask around. If someone tells you, "so and so got me a huge refund" you know the person they worked with wasn't educating them enough to help them understand the real goal of taxes.
2. Check the IRS Website to make sure the preparer you picked has a preparer tax identification number (PTIN). This applies even if you aren't working with a CPA or EA. No one can legally accept payment for preparing your taxes unless they have a PTIN from the IRS. The number should be entered on any tax return they file for you. (make sure they are planning to file and sign the return. There are some scams where the tax preparer does the work for you and does not sign the return and instead they have you sign as if you prepared the return yourself.
3. Search for the professional's name in social media to find out what other people are saying or what their reputation is.
4. Interview the potential tax professional (it is best to do this before January-April, tax season, when they get really busy). Don't hesitate to call the firm or the accountant to explore whether they have the expertise to handle your taxes if there's anything unusual about your situation.
5. If you try the tax professional one year and aren't satisfied, next year you do not have to use the same tax professional.
How are you planning to find your tax preparer? Comment below and let us know!