Saturday, January 26, 2013

Hiring a tax preparation pro: questions to ask

Programming a new Motorola Droid Razr Maxx "smart phone" is nothing but a pain for me. I'd rather find a Verizon technician to help me muddle through the app downloads and email set-ups. But when it comes to doing my federal tax return, Bring it On!
Tax filing has always been a rewarding challenge for two reasons: I save several hundred dollars by not having to pay a tax accountant, and -- this is the more important reason -- I like the challenge of doing taxes myself, using the long-form and itemizing deductions.
With the ability to print out tax forms from and to go online to get questions answered, doing my own taxes has become easier (and dare I say, more fun).
Most of my fellow taxpayers (women and men) don't see it that way. More than 74 percent of us hire someone to do our taxes. That's up from 53 percent in 1996.
With that in mind, here are tips for choosing a good tax preparer. These tips come straight from the IRS. Keep in mind that even though you may use a tax preparer, you (the taxpayer) are legally responsible for what's on the return. So choose your tax preparer carefully. By the way, the IRS is not accepting electronic 2012 tax returns until Jan. 31, 2013 because of the lateness of December's fiscal cliff debacle....the IRS has been busy reprogramming its computers.
And this year, as a way to cut down on fraud, the IRS reminds taxpayers to use a preparer who will sign the returns they prepare and enter their required Preparer Tax Identification Number (PTIN).
A few year ago, the federal
10 Tips for Hiring a Tax Return Preparer from the IRS:
1. Check the preparer’s qualifications. New regulations require all paid tax return preparers to have a Preparer Tax Identification Number. In addition to making sure they have a PTIN, ask if the preparer is affiliated with a professional organization and attends continuing education classes. The IRS is also phasing in a new test requirement to make sure those who are not an enrolled agent, CPA, or attorney have met minimal competency requirements. Those subject to the test will become a Registered Tax Return Preparer once they pass it.
2. Check on the preparer’s history. Check to see if the preparer has a questionable history with the Better Business Bureau and check for any disciplinary actions and licensure status through the state boards of accountancy for certified public accountants; the state bar associations for attorneys; and the IRS Office of Enrollment for enrolled agents.
3. Ask about their fees upfront. Avoid preparers who base their fee on a percentage of your refund or those who claim they can obtain larger refunds than other preparers. Always make sure any refund due is sent to you or deposited into an account in your name. Under no circumstances should all or part of your refund be directly deposited into a preparer’s bank account.
4. Ask if they offer electronic filing. Any paid preparer who prepares and files more than 10 returns for clients must file the returns electronically, unless the client opts to file a paper return.  More than 1 billion individual tax returns have been safely and securely processed since the debut of electronic filing in 1990.  Make sure your preparer offers IRS e-file.
5.Make sure the tax preparer is accessible.  Make sure you will be able to contact the tax preparer after the return has been filed, even after the April due date, in case questions arise.
6. Provide all records and receipts needed to prepare your return. Reputable preparers will request to see your records and receipts and will ask you multiple questions to determine your total income and your qualifications for expenses, deductions and other items. Do not use a preparer who is willing to electronically file your return before you receive your Form W-2 using your last pay stub. This is against IRS e-file rules.
7.Never sign a blank return. Avoid tax preparers that ask you to sign a blank tax form. Such a move spells real trouble and potential for fraud.
8.Review the entire return before signing it.  This seems like a given, but don't sign your tax return until you've reviewed it and asked questions. Make sure you understand everything and are comfortable with the accuracy of the return before you sign it.
You are legally responsible for what it says!!!
9.Make sure the preparer signs the form and includes their PTIN.  A paid preparer must sign the return and include their PTIN as required by law. Although the preparer signs the return, you are responsible for the accuracy of every item on your return.  The preparer must also give you a copy of the return.
10.Report abusive tax preparers to the IRS. You can report abusive tax preparers and suspected tax fraud to the IRS on Form 14157, Complaint: Tax Return Preparer. you can download Form 14157 from or order by mail at by calling 800- 829-3676.
According to the IRS, something like 11 percent of returns sent in by professional tax preparers have problems and questionable calculations. So even if you use a pro make sure you understand exactly what they did and how they did it. Or better yet, do it yourself!

Tax rates for the 2012 tax year, click here.
Tax changes coming in 2013, click here.
23 problems facing taxpayers, click here.
When can you begin filing your 2012 tax return?, click here.

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