How Life Really Works: Choosing a Tax Preparer

We got one of those car dealership advertisers in the mail the other day. You know the kind, with a fake key attached and a bunch of little rub-off squares to see if we could get three-in-a-row and win a new car. No such luck. But we did get three squares in a row that said $25,000, the second place prize. That seemed pretty unbelievable, so before we got too excited we read the contest rules exhaustively to see if we could find the catch, even called the phone number and were told to go to the dealership and collect our prize.

Now we were excited! All evening we thought of the cool things we could do with $25K. But when we got there the next morning, they checked the contest confirmation number on our mailer and it didn't match. Apparently, we were only one of thousands with three matching squares on their flier. You also have to be the one in 30,000 who got three matching squares and had the winning confirmation number. So we won't, in fact, be finishing our patio, getting new carpet, taking a cool trip, and putting $10K away for our daughter's college fund.

And that, people, is how life really works. Things that seem too good to be true almost never are. We all know that.

Yet, knowing that, we somehow still manage to get ourselves to believe the unbelievable when there’s a chance we can obtain an outsized financial benefit from it. Clear-eyed, intelligent adults, who are sure there’s no such thing as miracles, UFOs or the Tooth Fairy, will fall for all kinds of hopeless schemes if they can be half-persuaded that it will make them a buck.

I bring that up as another tax season begins because, sad to say, there are practitioners of this profession I love who are only too happy to take advantage of human nature. They make promises they can only deliver, if at all, by dishonesty and deceit. By the time the IRS kicks out the errors in the return and assesses penalties on the taxpayer, many of these so-called tax professionals have closed their offices and disappeared, leaving their gullible clients holding the bag.

If you pay someone to do your income taxes, choose that person wisely. Even if you don’t prepare the return, you’re still legally responsible for what’s on it.

Here are ten tips from the IRS to keep in mind when choosing a tax preparer, along with my corresponding assurances:

1. Check the preparer’s qualifications. All paid tax preparers are required to have a Preparer Tax Identification Number or PTIN. In addition to making sure they have a PTIN, ask the preparer if they belong to a professional organization and attend continuing education classes. I do have a PTIN and am a member of the National Association of Tax Professionals—I’m even vice-president of the Utah chapter. Not only do I attend several continuing education classes every year, but I update The Professional Tax Preparer, my tax course, ever year, which forces me to stay current.

2. Check the preparer’s history. Check with the Better Business Bureau to see if the preparer has a questionable history. Check for disciplinary actions and for the status of their licenses. For certified public accountants, check with the state board of accountancy. For attorneys, check with the state bar association. For enrolled agents, check with the IRS Office of Enrollment. I am not a CPA, not an attorney, nor am I an enrolled agent (although I plan to take the EA exams this summer). I have no dealings with the BBB and am unaware of any complaints filed against me.

3. Ask about service fees. Avoid preparers who base their fee on a percentage of your refund or those who say they can get larger refunds than others can. Always make sure any refund due is sent to you or deposited into your bank account. Taxpayers should not deposit their refund into a preparer’s bank account. This is the crux of most tax scams. Preparers will promise refunds, something that can’t be guaranteed, and then do whatever it takes to get one. In real life, refunds depend on how much the taxpayer withheld and/or whether he qualifies for certain deductions or credits, all of which is determined long before he meets with the preparer the next year. To guarantee a refund, and especially a large refund, a preparer usually has to lie on the return, claiming expenses that were never paid, dependents that do not exist, credits that were not earned. For this, they demand a percentage of the refund in return, often requiring that it go to them first so they can take their cut before giving you the rest. Not only do I charge by the form, not by the size of the refund, but my only goal is to file the most accurate and honest return I can. I will give you every credit and deduction possible, even some you may not realize you are entitled to, but I will not lie to do so. And I will still be here next year, unlike the scammers!

4. Ask to e-file your return. Make sure your preparer offers IRS e-file. Any paid preparer who prepares and files more than 10 returns for clients generally must file the returns electronically. IRS has safely processed more than 1.2 billion e-filed tax returns. All my returns are e-filed, as required by the IRS, and always have been, even when e-filing was not required. The only exceptions are a small number every year that contain certain items that must be filed on paper, and a few prior-year, amended or late-filed returns that fall outside the acceptance range of the IRS computers.

5. Make sure the preparer is available. Make sure you’ll be able to contact the tax preparer after you file your return - even after the April 15 due date. This may be helpful in the event questions come up about your tax return. As stated above, I am here year-round, and I’m not going anywhere. I am always here for you, from one tax season to another, and in between seasons if you have questions to ask, or concerns that need to be resolved. This is my living and a profession of which I’m proud, not some fly-by-night, get-rich-quick scheme.

6. Provide records and receipts. Good preparers will ask to see your records and receipts. They’ll ask you questions to determine your total income, deductions, tax credits and other items. Do not use 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. Those of you who have worked with me know that I insist on seeing every tax form you receive, and will even ask you to look for some you should have received. On the other hand, if you have long lists of receipts for business or medical expenses, or lengthy mileage logs, I will ask you to total them for me rather than pay me by the hour to total them for you. You don’t have to prove your expenses to me as though I were auditing you. Just keep the receipts for at least three years in case the IRS asks to see them.

7. Never sign a blank return. Don’t use a tax preparer that asks you to sign a blank tax form. Sounds silly, doesn’t it? Not only am I not brazen enough to ask such a thing, but I would hope all my clients are wise enough not to do so if asked!

8. Review your return before signing. 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. Except for certain long-distance, email-only taxpayers, I never finish a return without sitting down with my clients and going over it line-by-line, explaining everything and answering questions, so that there is no doubt in their minds as to how their refund or tax liability came about. In fact, that little chat with my clients prior to signing is one of my specialties, for which I am often complimented. Some people even say they never understood how the tax form worked until I went through it with them.

9. Ensure the preparer signs and includes their PTIN. Paid preparers must sign returns and include their PTIN as required by law. The preparer must also give you a copy of the return. All clients receive a copy of their return in my custom folder at our final meeting. However, when returns are e-filed they are not signed, not with your signature nor mine. Instead, we use a PIN number on what is called Form 8879, and sign that instead.

10. Report abusive tax preparers to the IRS. You can report abusive tax 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. You can get these forms at IRS.gov or by calling 800-TAX-FORM (800-829-3676). The IRS has been very aggressive in recent years in trying to put dishonest tax preparers out of business. So have many states, including California and New York, which have been centers for tax preparer fraud. I welcome their efforts and encourage you to report any abuses you are aware of. The profession will be better without dishonest preparers, and that makes the world a better place.

7 Comments

  • Joni Hilton says:

    This is the checklist they should have taught us all in high school! So many people have suffered from not knowing how to choose a competent, trustworthy tax preparer. And this site makes it fool proof. Thank you for compiling such clear, comprehensive advice.

  • Bill Brough says:

    Thank you, Joni! I appreciate the compliment. Hope you’ve found a good tax preparer in Rocklin, CA. You know, nowadays you don’t have to meet face to face with your preparer…you can just scan your tax docs and email them to me! (hint) Seriously! I do 5-6 out of town returns every year, some with longtime clients who have moved, and some with clients I have never met except online.

  • Jeff Stone says:

    The best advice is common sense. You know what they say, “Common sense ain’t so common.” I love articles like this that simply sum it up in a straight forward and simple manner. Thanks for the article!

    By the way, my tip for you . . . throw those auto dealer things in the garbage; I’ve had the exact same thing happen to me on more than one occasion. You’re in good company. 🙂

  • Kolene Mills says:

    Great advice from a great guy! Taxes can be such an overwhelming thing for so many of us–all that jargon, the numbers, the FORMS–so it is great to be able to hand that off to a professional. However, you are too right: not all professionals are created equal. I’m glad we’ve got you, Bill. I’ve got you, Bill… (I’m singing that last line.)

    Another great post from my favorite tax-preparer. Tis the season!

  • Bill Brough says:

    Isn’t that interesting, Kolene? I feel the same way about all my awesome clients. I’m glad I’ve got you!

  • paul davidson says:

    Great article. Thanks for the info, you made it easy to understand. BTW, if anyone needs to fill out a form 8879 ,I found a blank form here http://goo.gl/XIFNjj. This site also has some tutorials on how to fill it out and a few related tax forms.

  • Bill Brough says:

    Thanks, Paul. Glad you found it helpful.

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