1. DO YOU HAVE A VALID PTIN?
This is the most important question. Only individuals who have registered with the Internal Revenue Service and received a PTIN (Preparer Tax Identification Number) can prepare tax returns, or assist in the preparation of tax returns, for compensation. If the potential preparer does not have a valid PTIN walk out the door immediately!
Unfortunately there is not yet a free online searchable database of all valid PTIN-holders. The IRS will provide a PTIN Holder CD which lists all current PTIN-holders for $35.00. Click here for more information on how to request the CD.
2. WILL YOU BE SIGNING THE FINISHED RETURN?
Another very important question. All paid tax preparers MUST sign, and enter their PTIN on, all returns they prepare. If the potential preparer is not going to sign your finished returns walk out the door immediately!'
3. ARE YOU FAMILIAR WITH STATE TAX RETURNS FOR ____________?
You want to be sure the preparer is knowledgeable and experienced in the preparation of all the state and local resident, non-resident, and part-year resident income tax returns that you must file, and is able to prepare the returns of these states. Some states require specific registration or licensure for tax return preparers.
Most of my clients are from New Jersey, but several work in New York and must file NY non-resident returns. In order to prepare NY state income tax returns for compensation I must register with the State of New York, pay a fee, and be issued a special identification number, similar to the federal PTIN, that I must enter on all NY state tax returns – even though I live and work in Pennsylvania. Maryland also requires a imilar registration of tax professionals who prepare Maryland state returns.
In California and Oregon a person must be licensed by the state to be able to prepare tax returns for compensation.
4. DO YOU HAVE ANY TAX CREDENTIALS OR CERTIFICATIONS?
Is the preparer an EA, an ATP, or an ATA? Has he/she received a “Record of Completion” for the IRS Annual Filing Season Program? A credential or certification is NOT a necessary requirement – but it helps to identify the preparer’s level of competence and currency in 1040 preparation. See ALPHABET SOUP for detailed information on specific tax credentials and certifications.
5. DO YOU BELONG TO ANY TAX PREPARER MEMBERSHIP ORGANIZATIONS?
I strongly believe that tax preparers who belong to membership organizations like the National Association of Tax Professionals, the National Society of Tax Professionals, and the National Society of Accountants (“the other NSA”) are more serious and conscientious, and ultimately more competent and current in 1040 preparation, than those who do not.
Preparers join these organizations for access to discounted quality tax CPE, reasonably priced tax research, and online and print publications to keep them up-to-date on tax issues. And most organizations have a Code of Ethics or Standards of Professional Conduct to which members must adhere.
6. WHAT IS YOUR BACKGROUND IN TAX PREPARATION?
How did the preparer get started in “the business”? How did he/she learn how to prepare 1040s? Did he/she apprentice with a large firm or a small independent preparer? Does he/she specialize in any particular types of returns or taxpayers?
7. ARE YOU EXPERIENCED IN PREPARING TAX RETURNS FOR __________ ?
Fill in the blank with your specific trade or profession, or unique tax situations.
You want a preparer who is familiar with the specific deductions, credits, strategies, and loopholes available to firemen, policemen, nurses, truck drivers, outside salesmen, construction workers, real estate professionals, or whatever trade or profession applies to you.
Are you self-employed, do you have a farm, foreign bank accounts, or investments in hedge fund limited partnerships? You also want a preparer who is familiar with the specific, deductions, credits, strategies, loophole, and filing requirements of your unique tax situations.
8. HOW DO YOU DETERMINE YOUR FEE?
Do NOT ask how much the preparer will charge for preparing your return. It is literally impossible for a tax preparer to know upfront how much it will cost to prepare a specific return until after the return has actually been prepared. If I were still accepting 1040 clients and someone asked me “how much will you charge?” my honest answer would be “between $45 and $500”.
But you do want to know the methods used to calculate the fee. Does the preparer have an hourly rate or a standard per form fee? Or does he have a “hybrid method” – a base minimum fee for each particular form and schedule, with an additional hourly fee if additional work is required (for example – you are not organized). Ask if the preparer can provide you with a Fee Schedule.
Be aware that whatever the method of determining the fee, the more involved and time-consuming the return the greater the fee.
See THE COST OF TAX PREPARATION for information on average tax preparation fees.
9. WHAT IF MY RETURN IS AUDITED OR QUESTIONED BY THE IRS OR THE STATE?
Will the preparer respond to tax-related correspondence? Will he/she go to the audit with you or attend in your place as your legal representative? What are the additional fees for responding to a notice or an audit?
For example, here is what I tell my clients –
“If you receive correspondence from any of your ‘uncles’ during the year relating to a tax return I have prepared send it directly to me immediately. Do not call first! There is no fee – other than a $5.00 charge for my out-of-pocket printing and mailing expenses - for responding to CP-2000s, requests for information, penalty notices or any other similar federal or state inquires where the return in question was correct as originally filed. If the inquiry results in the preparation of an amended return I will charge accordingly based on my regular fee schedule.”
“In the event of a federal or state audit of a return I have prepared, I will meet with you to review the issues of the audit, provide research and documentation for the items in question, and prepare you in detail for the audit at no additional charge. I will also provide a ‘post-audit’ consultation to advise you on your options based in the audit results. If you wish me to go with you to the audit to answer questions on how I prepared the return I will charge at a rate of $XX per hour for the actual audit, plus any out of pocket expenses. I will not attend an audit in your place as your legal representative. If you want someone to do so I can refer you to someone experienced in taxpayer representation.”
10. ARE YOU AVAILABLE DURING THE YEAR TO ANSWER TAX QUESTIONS OR HELP WITH TAX PLANNING
Is the preparer available on a year-round basis for telephone, email, or sit-down consultation? Or does he/she disappear on April 16th? Will he/she provide you with information on, or be available to answer questions about, changes to federal and state tax law during the year?