Tax Lawyer's Blog

Kathy Kristof of Tribune Media Services offens advide on how to hire a tax preparer:

Check credentials: There are four types of tax preparers — tax attorneys, CPAs, enrolled agents and preparers.

The one designation that’s difficult to check is enrolled agents, who are licensed by the IRS. However, many join professional groups that have lists of members.

Ask questions: You should know how long your preparer has been in business and where he or she was trained, said Elaine Smith, master tax adviser and an enrolled agent with H&R Block. Ask whether your preparer gets more training every year and where you can find the preparer after April 15, she added.

“This is not a seasonal business for the IRS,” Smith said. “You need to make sure you can find your preparer and get help if you get a notice in November.”

Celeste Heritage, spokeswoman for the California Tax Education Council, added that it’s not a good sign if the preparer doesn’t have a permanent office.

Other questions to ask:

•Do you specialize? If you have a small business or self-employment income or if you’re a teacher, firefighter, police officer or public service worker, you may have unique deductions and credits.

•What tax laws that took effect last year might affect me? And what sort of information do you need to see whether I qualify? If your preparer can’t rattle off half a dozen significant changes, he or she isn’t keeping up, said Philip Holthouse, partner at Santa Monica, Calif., tax law and accounting firm Holthouse, Carlin & Van Trigt. Many new breaks are worth thousands of dollars.

•Do you stand behind the returns you prepare? If there’s an error, will you fix it for free? If your advice results in an audit that creates additional tax and penalties, do you pay that or do I?

Expect questions: To complete an accurate return, preparers always need to ask questions about lifestyle changes, such as whether you’re married or divorced, had a child or sent one to college.

This year, they also may need to know whether you put solar panels on your home or bought an energy-saving refrigerator or air conditioner. There are big breaks if you did.

Even if you take a standard deduction, your preparer will need to know whether you suffered a casualty loss in a declared disaster area (there’s a special tax deduction in 2009) and whether you pay property taxes, because there are add-ons to the standard deduction for those.

Look for red flags: There are a few things legitimate preparers never do. They don’t tell you that you can get a huge refund before they see your tax information. They don’t charge a percentage of your refund. They don’t ask you to sign a blank return that they’ll fill out later, and they never ask you to sign in pencil.

If they’re reluctant to sign the return, be reluctant to give them a check, said H&R Block’s Smith.

Related Posts:

• Tax Preparers, Assumptions & Discount Parachutes
• How to Choose a Tax Advisor
• WebCPA Tax Advice: Avoid IRS Audit by Hiring Licensed Tax Preparer

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