WASHINGTON — While there is still time before the next tax filing season,
choosing a return preparer now allows more time for taxpayers to consider
appropriate options and to find and talk with prospective tax preparers rather
than during tax season when they’re most busy. Furthermore, it enables
taxpayers to do some wise tax planning for the rest of the year. If a taxpayer
prefers to pay someone to prepare their return, the Internal Revenue Service
encourages them to choose that person wisely as the taxpayer is legally
responsible for all the information included on the return.
This is the third in a series of weekly tax preparedness releases designed
to help taxpayers begin planning to file their 2015 return.
Below are some tips taxpayers can keep in mind when selecting a tax
professional:
- Select an ethical preparer. Taxpayers entrust some
of their most vital personal data with the person preparing their tax
return, including income, investments and Social Security numbers.
- Ask about service fees. Avoid preparers who
base their fee on a percentage of the refund or those who say they can get
larger refunds than others. Taxpayers need to ensure that any refund due
is sent to them or deposited into their bank account, not into a
preparer’s account.
- Be sure to use a
preparer with a preparer tax identification number (PTIN). Paid tax return
preparers must have a current PTIN to prepare a tax return. It is also a
good idea to ask the preparer if they belong to a professional
organization and attend continuing education classes.
- Research the preparer’s
history.
Check with the Better Business Bureau to see if the preparer has a
questionable history. For the status of an enrolled agent’s license, check
with the IRS
Office of Enrollment (enrolled agents are licensed by the IRS and are
specifically trained in federal tax planning, preparation and
representation). For certified public accountants, verify with the state
board of accountancy; for attorneys, check with the state bar association.
- Ask for e-file. Any paid preparer who
prepares and files more than 10 returns for clients generally must file
the returns electronically.
- Provide tax records. A good preparer will
ask to see records and receipts. Do not use a preparer who is willing to
e-file a return using the latest pay stub instead of the Form W-2. This is
against IRS e-file rules.
- Make sure the preparer
is available after the filing due date. This may be helpful if
questions come up about the tax return. Taxpayers can designate their paid
tax return preparer or another third party to speak to the IRS concerning
the preparation of their return, payment/refund issues and mathematical
errors. The third party authorization checkbox on Form 1040, Form 1040A
and Form 1040EZ gives the designated party the authority to receive and
inspect returns and return information for one year from the original due
date of the return (without regard to extensions).
- Review the tax return
and ask questions before signing. Taxpayers are legally responsible for what’s on their
return, regardless of whether someone else prepared it. Make sure it’s
accurate before signing it.
- Never sign a blank tax
return.
If a taxpayer signs a blank return the preparer could then put anything
they want on the return — even their own bank account number for the tax
refund.
- Preparers must sign the
return and include their PTIN as required by law. The preparer must also
give the taxpayer a copy of the return.
Directory of Federal Tax Return Preparers with Credentials and
Select Qualifications
To help taxpayers determine return preparer credentials and qualifications,
the IRS launched a public
directory
earlier this year containing certain tax professionals. The directory is a
searchable, sortable database with the name, city, state and zip code of
credentialed return preparers as well as those who have completed the
requirements for the new IRS
Annual
Filing Season Program and have a valid 2015 PTIN.
Understanding Tax Return Preparer Credentials and Qualifications
Any tax professional with an IRS PTIN is authorized to prepare federal tax
returns. However, tax professionals have differing levels of skills, education
and expertise.
An important difference in the types of practitioners is “representation
rights.” Below is guidance on each credential and qualification:
Unlimited Representation Rights: Enrolled agents, certified
public accountants and attorneys have unlimited representation rights before
the IRS. Tax professionals with these credentials may represent their clients
on any matters including audits, payment/collection issues, and appeals.
• Enrolled Agents – Licensed by the IRS. Enrolled agents are subject to
a suitability check and must pass a three-part Special Enrollment Examination,
which is a comprehensive exam that requires them to demonstrate proficiency in
federal tax planning, individual and business tax return preparation and
representation. They must complete 72 hours of continuing education every three
years. Learn more about the
Enrolled
Agent Program.
• Certified Public Accountants – Licensed by state boards of
accountancy, the District of Columbia and U.S. territories. Certified public
accountants have passed the Uniform CPA Examination. They have completed a
study in accounting at a college or university and also met experience and good
character requirements established by their respective boards of accountancy.
In addition, CPAs must comply with ethical requirements and complete specified
levels of continuing education in order to maintain an active CPA license. CPAs
may offer a range of services; some CPAs specialize in tax preparation and
planning.
• Attorneys – Licensed by state courts, the District of Columbia or
their designees, such as the state bar. Generally, they have earned a degree in
law and passed a bar exam. Attorneys generally have on-going continuing
education and professional character standards. They may also offer a range of
services; some attorneys specialize in tax preparation and planning.
Limited Representation Rights: Preparers without one of
these credentials (also known as unenrolled preparers) have limited practice
rights. They may only represent clients whose returns they prepared and signed,
but only before revenue agents, customer service representatives, and similar
IRS employees, including the Taxpayer Advocate Service. They cannot represent
clients whose returns they did not prepare and they cannot represent clients
regarding appeals or collection issues even if they did prepare and sign the
return in question.
• Annual Filing Season Program participants – This new voluntary
program recognizes the efforts of return preparers who are generally not
attorneys, certified public accountants, or enrolled agents. The IRS issues an
Annual Filing Season Program Record of Completion to return preparers who
obtain a certain number of continuing education hours in preparation for a specific
tax year.
Beginning with the 2015 filing season, unenrolled return preparers could opt
to participate in this IRS program, which was designed to encourage education
and filing season readiness.
• PTIN holders – Tax return preparers that have an active PTIN but no
professional credentials and do not participate in the annual filing season
program, are authorized to prepare tax returns. In 2015, they also have limited
representation rights. This is the final year that PTIN holders without another
credential or qualification will have limited representation rights for returns
they prepare and sign. For returns prepared beginning Jan. 1, 2016, only annual
filing season program participants will have limited representation rights.
Most tax return preparers are professional, honest and provide excellent
service to their clients. However, dishonest and unscrupulous tax return
preparers who file false income tax returns do exist. Always check any return
for errors to avoid potential financial and legal problems. See information
about
Abusive
Return Preparers on
IRS.gov,
and learn
How
to Make a Complaint About a Tax Return Preparer.
For more information about choosing a tax return
preparer, see Choosing
a Tax Professional and IRS
Tax PRO Association Partners on IRS.gov.
