Despite being an annual event, filing your taxes isn’t always straightforward. With various rules and formulas to know, plus a number of forms to fill out, it can be all too easy to make a mistake if you go it alone. It’s no wonder then that more than half of tax returns are completed by professionals, according to the IRS.
If you’re looking to find a tax preparer — and a good one at that — how can you be sure you’re making the right choice? Referrals are a great place to start, but you should still do your due diligence. Not only do you want to ask the right questions, but you also want to be on the lookout for the right answers.
Here are eight questions to ask a tax professional before you decide to hire one.
8 questions to ask to help you find a tax preparer
Do you have a preparer tax identification number?
Anyone who charges a fee to prepare taxes must register with the IRS and receive a preparer tax identification number (PTIN). In addition to signing your completed return, the tax preparer is required by law to enter this number on any return he or she prepares.
“In the past, anyone was allowed to prepare a tax return — even if they had no knowledge of how to do it,” says Dennis Cole, a certified public accountant and managing partner of Beers, Hamerman, Cohen & Burger. “The IRS now requires tax preparers to have a PTIN.”
This is the first question you should ask any tax pro. Why? Because if you end up hiring someone who doesn’t have a PTIN, the IRS could hit you with a slew of penalties, fees and other legal actions.
Which type of representation rights do you have?
Tax preparers fall into one of two main representation categories. Those who have “unlimited representation rights” can represent clients on any matter, ranging from audits to collection issues to appeals. Those who carry “limited representation rights” can only intervene on behalf of people whose returns they prepared and signed, and only under specific circumstances.
According to the IRS, tax professionals with unlimited representation rights include attorneys, certified public accountants (CPAs) and enrolled agents (EA), or those who have passed a three-part IRS enrollment exam. While an EA is not an employee or representative of the government, he or she can act on a taxpayer’s behalf when it comes to dealing with the IRS. In order to retain their licenses, enrolled agents must complete a minimum of 72 hours of continuing education every three years.
Both attorneys and CPAs are required to obtain licenses according to the rules and regulations of the states in which they conduct their business. However, this does not necessarily mean that they will be tax experts. While some attorneys do specialize in tax planning and preparation, keep in mind that most perform a range of other duties. This means that their focus may not be on filing returns for clients. Similarly, CPAs may perform many duties outside of tax preparations, and many specialize in other areas of finance.
Before hiring any professional to prepare your tax returns, make sure you are comfortable with their level of expertise as well as their representation rights.
Is your experience a good fit for my situation?
If you know your tax situation is not typical, make sure the professional you hire is someone who has completed returns similar to yours.
Working with a tax preparer who is familiar with your line of work can be the difference between claiming all the deductions you’re eligible for and forfeiting money. If your taxes are more complicated than the average person’s — you’re self-employed, own a business or rental property, live in one state but work in another, have received an inheritance, or have worked abroad — your tax preparer should be well-versed in handling these specific situations.
“We do a lot of foreign tax reporting, which is very specialized,” Cole says, “and failure to properly file can result in substantial penalties. In these instances, it is critical to have a knowledgeable preparer.”
What is your fee?
Before you agree to hire any kind of tax preparer, make sure to discuss what you can expect to pay.
Some tax professionals may charge their clients based on the number of forms and schedules that must be filed with the return. Others may charge hourly, while some may do a combination of both. However, the IRS recommends avoiding a preparer who wants to charge you a percentage of your refund.
“Costs vary from preparer to preparer,” Cole says. “Typically, an EA would be less costly than a CPA, but would also most likely not possess as advanced tax knowledge — which might be necessary for complicated returns.”
It’s also a good idea to note what the average price might look like so that you can be certain you are being charged fairly. According to a recent survey conducted by the National Society of Accountants, the typical firm charges an average fee of $220 to submit a Form 1040 without any itemized deductions. For itemized deductions, the fee averages $323. While you might assume a commercial tax preparation chain will charge a lower fee than an independent professional, it's still a good idea to ask for an estimate or range before you commit to using any tax professional.
Do you belong to any professional organizations?
Being a member of a professional organization is not a requirement to be a tax preparer, but it can be a sign that whoever you are considering is serious about the profession.
Additionally, many organizations offer members resources, such as continuing education and access to research, to help them stay up-to-date with current tax developments and recent tax law changes.
Many organizations — including the National Society of Accountants (NSA), the National Association of Enrolled Agents (NAEA), and the National Association of Tax Professionals (NATP) — hold members to a special code of ethics, which may give you additional peace of mind.
Can you help me understand recent tax code changes?
The tax code is constantly changing. Whoever you hire to prepare your taxes must be intimately familiar with these changes and how they might affect your return in a given year. If they’re not, you may find yourself leaving money on the table, or worse — paying fines and fees for improper filing.
As just one example, consider that for the 2022 tax year, the standard deduction rose for all taxpayers: $400 for single taxpayers and married individuals filing separately; $600 for heads of household; and $800 for married couples filing jointly.
With this in mind, you should ask your tax preparer if they can explain any recent changes to the tax code that might affect your return.
What would working with you look like?
Before you hire a tax professional, it’s important to understand how they prefer to work and whether or not this aligns with your own preferences and expectations.
First, consider how you prefer to communicate. Would you like to meet with your tax preparer in person, or are you comfortable working together remotely via email, phone and text?
Second, how often would you like to touch base with your tax professional? Would once a year be adequate, or do you expect yourself to need more frequent interactions — perhaps to answer questions or adjust your tax strategy throughout the year?
There are no right or wrong answers to these questions. You’re simply looking for someone who will be able to meet your expectations.
What will you need from me to get started?
During the client onboarding process, your tax preparer will need certain information from you in order to get started. Knowing what they will need from you ahead of time can ease a lot of the stress we associate with tax season.
In most cases, your tax preparer will need:
- A copy of your most recent tax return,
- Income statements,
- Proof of expenses (for itemized deductions) and
- Identification (names, birth dates, Social Security numbers) for you and your dependents.
This article is not intended as legal or tax advice. Northwestern Mutual and its financial representatives do not give legal or tax advice. Taxpayers should seek advice regarding their particular circumstances from an independent legal, accounting or tax adviser.