How prepared is your Tax Preparer?

The courts have ruled the IRS does not have the authority to regulate tax preparers. This recent decision came from a U.S. Court of Appeals and the IRS has indicated they will most likely not pursue any further appeals. The IRS was attempting to regulate preparers by requiring them to pass a basic exam before allowing them to prepare tax returns for compensation.

So we are back to the Wild West where anyone can hang up a shingle as a tax preparer. It’s really up to you to determine if your preparer is competent.  Here are some issues to consider:

·    What are your tax preparer’s credentials? Enrolled Agents and CPAs must pass stringent examinations to earn their credentials, and must comply with ongoing education requirements and codes of conduct. (As an Enrolled Agent I might be biased, but I think you should always work with a credentialed professional; there is no reason not to.)

·    Does your tax preparer have a PTIN? A PTIN is a preparer tax identification number. It means the preparer is at least registered with the IRS and can sign your return.  (It says nothing about his or her experience or expertise.)

·    Does your tax preparer sign your return? A tax preparer who prepares a return for compensation is required to sign the return and include his or her PTIN.

·    Is the tax preparer’s fee contingent upon the size of your tax refund? That’s wrong. The IRS does not permit this type of fee arrangement. It creates a financial incentive for the tax preparer to inflate your refund.

·    Is your refund too good to be true? Then it probably is. You will be responsible for the correct amount of tax plus penalties and interest.

·    Will your tax preparer be available after April 15th? An inquiry from the IRS or state taxing authority will generally come well after April 15th. (In general, the IRS has three years from your tax filing deadline to question or challenge your return.) Will your preparer be there for you? An Enrolled Agent or CPA can represent you in regard to any inquiry or proceeding by the IRS or DRS.

You are ultimately responsible for the accuracy of your tax return, regardless of who prepared it. However, it certainly helps to have a credentialed tax preparer who will stand behind his or her work.

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Please visit my website for additional articles and information on tax related issues.