If you’re expecting a tax refund, you may be eager to file your taxes as soon as possible so you can pay off debt, build an emergency or other savings account or shop for any number of previously unaffordable consumer goods.
However, rushing into a relationship with the first tax preparer you find could be a big mistake. The IRS recommends choosing a tax return preparer carefully, since no matter who prepares your taxes, you’re still ultimately responsible for all the information on your tax return.
1. Understand tax preparer qualifications
According to the Better Business Bureau (BBB), there are around 700,000 non-credentialed tax preparers in the U.S. Many states don’t require tax preparers to pass an exam or obtain a license. While non-credentialed tax preparers may be top-notch preparers, they have limited representation rights and can’t represent you in court or regarding appeals or collection matters.
2. Search by qualifications
If you need a tax preparer with specific qualifications such as enrolled agent, attorney, Certified Public Accountant or enrolled retirement plan agent, search the IRS Directory of Federal Tax Return Preparers with Credentials and Select Qualifications.
For guidance on choosing the right tax preparer for your needs, check out ‘Need Someone to Prepare Your Tax Return?’ from the IRS.
Estimate your owed federal and state taxes based off your taxable income.
3. Interview tax preparers
Make sure a tax preparer has an active preparer tax identification number (PTIN) through the IRS and check whether the person meets state requirements. Then interview the tax preparer thoroughly. Ask about fees, availability, and what kinds of records the tax preparer will need.
“Most tax preparers are legitimate and competent, but keep in mind that without a national license requirement, they may be working off of their own personal research and experience,” says the BBB. “Because of this, it is important you conduct a thorough interview with the tax preparer before you hire them.”
4. Check the tax preparer’s history
The IRS recommends contacting the Better Business Bureau before hiring potential tax preparers. Also check with the appropriate state agency for disciplinary actions and licensed status on credentialed preparers.
“For CPAs, check with the State Board of Accountancy. For attorneys, check with the State Bar Association. For Enrolled Agents, go to the verify enrolled agent status page on IRS.gov or check the directory,” says the IRS.
5. Get trusted referrals
One of the best ways to find a tax preparer you trust is by asking friends and family for recommendations. That doesn’t mean you should hire your tax preparer sister-in-law just because she’s family, though. Before hiring any tax preparer, perform a BBB search for details on consumer reviews or complaints.
6. Be leery of big refund promises
Promises to beat the competition when it comes to the amount of your refund is a red flag, since pressure to increase your refund can lead some tax preparers to use questionable tax preparation tactics, says the BBB. Also, avoid tax preparers offering “refund anticipation loans” and take a large percentage of your refund for commission fees.