In today’s ever-changing world of tax and identity fraud, it is more important than ever that you, the taxpayer, know who is handling your personal information. Your tax preparer knows everything the identity thieves want to know about you – your Social Security Number, Date of Birth, Bank Account Number, and possibly more. So what should you know about your tax preparer? Following is a list of 5 questions that you should ask your tax preparer, feel comfortable with their answers, and most of all trust them like you are handing them your checkbook or debit card – because, after all, that may exactly be what you are doing.
Question 1: Do you have a PTIN (Preparer Tax Identification Number)?
Answer 1: Yes. Everyone who prepares taxes for compensation is required to have a PTIN through the IRS. This should be the first and possibly most important question you can ask. If your tax preparer does not have a PTIN, they are not authorized to prepare your tax return. If you haven’t already, definitely DO NOT give them any further personal information. Rather run for the hills!
Question 2: Who will sign my tax return?
Answer 2: You, the taxpayer, will sign your tax return which is generally done by signing Form 8879 which authorizes the tax preparer to E-File your tax return. Also, as required by law, the tax preparer must sign and include their PTIN on your tax return.
Question 3: Will you E-File my tax return?
Answer 3: Yes. A paid tax preparer is required to E-File if preparing 11 or more tax returns in a calendar year. You, as a taxpayer, can opt out of E-Filing by requesting your tax preparer to complete Form 8948, Preparer Explanation for Not Filing Electronically.
Red Flag: Your tax preparer tells you to manually sign your tax return, take it home, and mail it. If this should happen to you the first question you should ask is why they are not completing the Paid Preparer Use Only section which is at the very bottom of page 1 (see above picture in answer 2). This is required by law (as stated in answer 2) & more than likely your tax preparer files over 11 tax returns in a year which requires them to E-file (as stated in answer 3).
Question 4: Are you available after tax season?
Answer 4: Ideally, you want your tax preparer to be available year-round to answer any questions that come up during the year or if you should be one of the lucky taxpayers to receive a letter from the IRS, you want to know your tax preparer is just a phone call away.
Question 5: What is your tax experience/background?
Answer 5: Ideally, you want your tax preparer to be an expert in the world of tax. However, I see many clients that are price shoppers. Your tax return is one area you definitely should not be shopping around for price. Your tax preparer knows all your personal identification, so make sure your tax preparer is someone you can TRUST! Of course, I recommend you choose an Enrolled Agent such as myself. However, whoever you choose, be sure you are comfortable not only with their level of tax knowledge & experience but also protecting your personal information. Remember identity thieves are out there, day & night, 24/7, just waiting for an opportunity to get enough information about you to use it for their benefit.
Following is a list of professions that are sometimes taken for granted their level of tax knowledge & experience.
- An Enrolled Agent (EA) has earned the privilege of representing taxpayers before the Internal Revenue Service by either passing a three-part comprehensive IRS test or through experience as a former IRS employee. EA status is the highest credential the IRS awards. EAs must adhere to ethical standards and complete 72 hours of continuing education courses every three years.
- A Certified Public Accountants (CPA) is certified by the state to act as a public accountant. A CPA is the only licensed qualification in accounting. To be certified, candidates are required to pass an exam. Most states also require an ethics exam or course as well as continuing education credits. A CPA may specialize in tax but not necessarily: there’s a wide range of CPA services including accounting, auditing, financial planning, technology consulting and business valuation.
- A Certified Financial Planner (CFP®) is a designation for financial planners given by the Certified Financial Planner Board of Standards. A CFP must meet certain education requirements, pass an exam, have experience in the field, pass fitness standards and pay a certification fee: the coursework and exam do have tax and tax planning components as determined by the Board. A CFP may have tax experience but tax may not necessarily be the focus of their practice.
- A JD is a law degree. An LLM is a Masters in Law – it could be in taxation but other areas of the law also offer an LLM. As with a CPA, candidates are required to pass an exam, an ethics exam or course and take continuing education credits. Having a law degree or two doesn’t necessarily mean that an attorney prepares returns. Some lawyers might have very little in the way of tax experience. Avoid a lawyer who promises to do your taxes, get you out of that DUI, and help you with your divorce: it’s all too much.
You can search the IRS website for a Directory of Federal Tax Return Preparers with Credentials and Qualifications at https://irs.treasury.gov/rpo/rpo.jsf.
Friday, Oct. 6 – Reminders & tips if you have not yet filed your 2016 tax return. Tax extensions are due Monday, Oct. 16. Check out our specials at Local Saver.
Monday, Oct. 9 – I will answer the question of what is a Certifying Acceptance Agent (CAA) and the benefits of using one. Note: This applies to foreign individuals and those who are not eligible for a SSN but must file a tax return.
Friday, Oct. 13 – I will have our second Q&A Segment focusing on tax reporting for a loved one after they pass away.
Celebrate the Underdogs is Thursday, Oct. 12 from 5:30pm-9:30pm at the Grand Meridian. This is a fundraiser for Unforgettable Underdogs animal rescue. Check out the event on Facebook at Facebook Event.