Just yesterday, the IRS revealed the results of a six-month landmark study that requires paid tax preparers register, pass competency tests, and participate in continuing education. This is a step in the right direction of not only protecting taxpayers in one of their biggest financial decisions of each year but also ensuring quality service for all taxpayers. Unfortunately, these requirements will not be in effect for the current 2010 tax season. What is a taxpayer to do?
Choose the right credentials.
- Taxpayers should look to what the future requirements will be in determining who to choose this year. The requirements will require competency tests for all paid tax return preparers except attorneys, certified public accountants (CPAs) and certain enrolled agents as well as requiring ongoing continuing professional education for all paid tax return prepares except attorneys, CPAs, enrolled agents and others who are already subject to continuing education requirements. Thus, taxpayers should choose a preparer from one of these three areas: attorneys, CPAs, and enrolled agents. H&R Block, a Kansas City based company, and Jackson Hewitt have expressed support for these measures, but currently there is no quality control on their services other than what they impose.
- Taxpayers should also be aware that while any individual can preparer a return, only attorneys, CPAs and enrolled agents can represent them in front of the IRS.
- Taxpayers should use a reputable tax professional who signs the tax return and provides a copy.
- Taxpayers should find out if the return preparer is affiliated with a professional organization that provides its members with continuing education and other resources and holds them to a code of ethics.
- Taxpayers should evaluate whether the preparer is going to be around in the next three years (the relevant statute of limitations).
Someone that takes the time to explain your tax liability. Taxpayers should seek out a preparer that not only completes the form but also explains the reasoning behind the calculations and deductions. Especially considering that even though a taxpayer uses a paid tax preparer, the taxpayer remains legally responsible for what is on their tax returns.
Avoid preparers that over-promise. Taxpayers should be wary of tax preparers who claim they can obtain larger refunds than others.
Avoid preparers that charge excessive fees. Taxpayers should avoid tax preparers who base their fees on a percentage of the refund. I would lump into this category, preparers that give taxpayers an instant refund check in exchange for a fee and the right to receive the taxpayer’s actual refund check from the government. With the speed direct deposit reaches the taxpayers account (sometimes within a week), it seems ridiculous to pay the fees for the instant refund.
The IRS has many free tax resources to help you complete your return, including the IRS Fee File program, which allows virtually everyone to file their taxes for free through the IRS’s website. Of particular note, is the IRS’s special section on the Recovery tax benefits and tax credits.
– The State Line Lawyer
Update: Here is a great article from MissouriFamilies.org explaining how the annual percentage rates on refund anticipation loans can range from 40% to 1,800% and how to choose a tax preparer. In case the embedded link doesn’t work: http://missourifamilies.org/features/financearticles/refundloan.htm.
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