Choosing the Right Tax Professional

Choosing the right tax professional. Four questions to ask when looking for a tax professional who is qualified to help you maximize your tax refund.

Last year, nearly 48 million taxpayers prepared their own tax returns, accounting for 38 percent of all electronic filings. In addition, self-preparation increased by 6 percent compared with 2013.

While the percentage of people choosing to file taxes on their own has increased, working with a professional tax preparer remains a viable option. If you fall into this camp, you’ll want to ensure you’re choosing the right tax preparer for your circumstances.

Choosing the Right Tax Professional

When choosing a tax professional, consider asking the following questions:

1) Does the tax preparer belong to any professional tax associations?

Ask if the tax preparer belongs to any tax associations that have minimum continuing education standards. Forty-six states do not have licensing, training, or experience standards for their tax professionals. Beware of individuals who do not have credentials.

2) What are the tax preparer’s qualifications?

Licensing and testing requirements for tax professionals may vary from state to state. For example, requirements have been in place for years in California and Oregon. New York has standards similar to these two states, and Maryland just added requirements as well. More educated professionals are more likely to know current IRS and state laws that affect their clients.

The IRS recently created the Annual Filing Season Program (AFSP) to encourage unlicensed tax professionals to stay up to date on new laws and ethics and to learn more about other federal tax laws and issues. To be awarded a “Record of Completion,” these tax professionals may have to pass a test. Once a preparer obtains a Record of Completion, you will be able to find him or her in the IRS’ tax preparer database, slated to launch this year.

3) What does your tax preparer’s title mean?

Certified Public Accountants (CPAs) are licensed by their state societies. Their society’s continuing education standards generally do not require that they study a minimum number of tax hours, but most CPAs have extensive tax practices and stay up to date on tax issues. If you have complex corporate and accounting issues, or if you are planning to take your business public, a CPA may be a good bet.

Enrolled Agent (EA) status is the highest credential the IRS awards. To retain that status, EAs must complete an average of 24 hours of education in federal taxation each year, while members of the National Society of Enrolled Agents (NAEA) must complete 30 hours. EAs are typically strong in certain areas of tax preparation including family tax, small business, and tax debt resolution.

You generally won’t need a tax attorney unless you are facing serious tax problems, criminal issues, or complex estate issues. If you find yourself in need of a tax attorney, check to see if the professional you are considering is a member of the American Bar Association’s Tax Section.

Keep in mind that in order for an EA, CPA, or attorney to represent you before the IRS—and most state and local tax agencies—he or she must be in good standing (not under suspension or disbarment). Preparers who have completed the AFSP are permitted to respond to the IRS’s questions on tax returns they prepared, but they are not allowed to represent you on issues pertaining to a balance due.

4) Do you know what tax preparers can help you – free of charge?

The IRS offers two types of free access to tax professionals. There is the Volunteer Income Tax Assistance (VITA) program, which is for individuals who earn $53,000 annually or less, and the Tax Counseling for the Elderly (TCE) program, which is for folks age 60 or older. You will find locations all over the country staffed by volunteers, many of whom are qualified and licensed EAs and CPAs. They are happy to help you, explain things to you, and prepare your tax returns, but they may not offer tax advice.

To find the best tax pro for your needs, start by getting recommendations from people you know. Look for a pro who works with people like you (those who share your profession or business, your residency status, or your family issues) and who treats you and your concerns with respect. Avoid anyone who promises huge refunds. If a tax pro’s claims sound too good to be true, they probably are.

Eva Rosenberg, EA is the publisher of TaxMama.com ®, where your tax questions are answered. She is the author of several books and ebooks, including Small Business Taxes Made Easy. Eva teaches terrific courses that might help individuals and small businesses at CPE Link.