Selecting a tax return preparer, part 1: where to start

Given the complexity of the U.S. tax code, it is scarcely surprising that many Americans use professional tax preparers.

Often people use the same trusted preparer year after year. This can provide an important element of continuity amid the tax law changes that seem to come every year.

It is also true, however, that tax preparer fraud is a recurring problem that affects many taxpayers. As we discussed in our August 30 post, this type of tax fraud is so widespread that the IRS put it in the so-called “dirty dozen” list of common tax scams.

In this two-part post, then, we will discuss tips offered by the IRS itself for how to go about selecting a professional tax preparer.

Naturally, the place to start is by looking at the professional qualifications of the preparer. If a certain preparer was recommended to you by someone whom you trust, that is of course an important vote of confidence.

But regardless of whether a tax preparer has been recommended to you, there are some basic steps you can take in the way of due diligence.

For example, one basic step would be to make sure that the person you are considering has a Preparer Tax Identification Number (PTIN).

Professional tax preparers are required to register with the IRS and obtain these PTINs. If someone offers tax preparation services but does not have a PTIN, this would be a red flag for IRS compliance issues.

It is also important to make sure that a preparer is well versed in e-filing procedures. This is important not merely because the IRS encourages e-filing. Fluency with e-filing is also a very useful service that makes the entire tax return filing process much simpler and easier for many taxpayers.

In next week’s post, we will discuss the importance of checking your return, even if you have complete trust in your chosen preparer.

Source: IRS.gov, “Ten Tips to Help You Choose a Tax Preparer,” Jan. 10, 2012