12 tips when choosing a tax professional

IRS sent out a warning yesterday to taxpayers to be careful when working with tax professionals that promise “maximum refunds” or are hesitant to sign the tax return as a preparer. This happens to be part of the “Dirty Dozen” tax scam which is common during the tax season.

The majority of tax professionals are in the business because they are genuinely interested in helping their clients. 60% of taxpayers use tax professionals to prepare their returns. They are in the profession because they want to be an advocate for taxpayers and strive to provide value added service. That doesn’t mean that there are no bad apples. A lot of petty scam artists set up shop every year to scam unsuspecting taxpayers.

Every year, IRS works extremely hard to find, investigate and prosecute the scam artists and criminals engaging in illegal activities such as filing fake returns and stealing identities. But it wants the taxpayers to be vigilant of such scams and report when necessary.

It is important to do your research before you hire a tax professional to prepare your tax return. This goes for individual tax preparers as well as the ones that work for tax firms. Just because the firm is reputable doesn’t mean the tax professional is also well-versed in dealing with your particular tax situation.

Here are 12 tips when choosing a tax professional:

1. Paid tax professionals are required to have IRS issued Preparer Tax Identification Number (PTIN). When signing the return, paid tax professionals are required to enter the PTIN instead of their Social Security Number. PTIN is an 8-digit identification number which contains P in the beginning.

2. Tax return preparers are not required to have a professional credential, but most competent tax professionals have one. If your tax professional doesn’t have a credential, make sure you understand the qualifications. Enrolled Agent, Certified Public Accountant, or Attorney is considered a professional credential. For 2015, Affordable Care Act provisions can be complex for a tax professional that doesn’t have the required credentials.

3. Use the IRS Directory of Federal Tax Return Preparers with Credentials and Select Qualifications. This tool can help you find a tax return preparer with the qualifications that you prefer. The Directory is a searchable and sortable listing of certain preparers registered with the IRS. It includes the name, city, state and zip code of:

• Attorneys
• CPAs
• Enrolled Agents
• Enrolled Retirement Plan Agents
• Enrolled Actuaries
• Annual Filing Season Program participants

4. Ask the Better Business Bureau about the preparer. Check for disciplinary actions and the license status for credentialed preparers. For CPAs, check with the State Board of Accountancy. For attorneys, check with the State Bar Association. For Enrolled Agents, go to IRS.gov and search for “verify enrolled agent status” or check the Directory.

5. Preparers are not allowed to base fees on a percentage of their client’s refund. Also avoid those who boast bigger refunds than their competition. Make sure that your refund goes directly to you — not into your preparer’s bank account.

6. Make sure your preparer offers IRS e-file. Paid preparers who do taxes for more than 10 clients generally must offer electronic filing. The IRS has processed more than 1.5 billion e-filed tax returns. It’s the safest and most accurate way to file a return.

7. Good preparers will ask to see your records and receipts. They’ll ask questions to determine your total income, deductions, tax credits and other items. Do not rely on a preparer who is willing to e-file your return using your last pay stub instead of your Form W-2. This is against IRS e-file rules.

8. In the event questions come up about your tax return, you may need to contact your preparer after the return is filed. Avoid fly-by-night preparers.

9. Attorneys, CPAs, and Enrolled Agents can represent any client before the IRS in any situation. Non-credentialed tax return preparers can represent clients before the IRS in only limited situations, depending upon when the tax return was prepared and signed.

10. Don’t use a tax preparer that asks you to sign an incomplete or blank tax form.

11. Before you sign your tax return, review it and ask questions if something is not clear. Make sure you’re comfortable with the accuracy of the return before you sign it.

12. You can report improper activities by tax return preparers and suspected tax fraud to the IRS. Use Form 14157, Complaint: Tax Return Preparer. If you suspect a return preparer filed or changed the return without your consent, you should also file Form 14157-A, Return Preparer Fraud or Misconduct Affidavit.

To find other tips about choosing a tax professional, to understand the differences in credentials and qualifications, research the IRS preparer directory, and learn how to submit a complaint regarding a tax return preparer, please visit www.irs.gov/chooseataxpro.

Remember: You are legally responsible for what is on your tax return even if it is prepared by someone else. Make sure the preparer you hire is competent and working in your interest.