Making Cents: How to choose a tax preparer
By: John P. Napolitano, CFP®, CPA, PFS, MST
As the tax season approaches, perhaps it’s time for you to hire a professional tax preparer or replace the one that you’ve got. Most of the common do it yourself programs are pretty good these days, but there’s no substitute for a good professional to help you out in the gray areas.
The first criterion is competence. While there is currently no formal requirement for tax preparers in terms of education or experience, the IRS does make all tax preparers register with the government as a preparer. If the person who you’d like to use is not registered, or refuses to register, keep shopping.
Most CPAs or enrolled agents are competent in tax preparation. While CPAs often have more rigorous general training than an enrolled agent, don’t assume that just because someone is a CPA that they are a tax professional. Enrolled agents, on the other hand, must either prove to the IRS that their experience and training qualifies them to represent clients in front of the IRS or pass a three part exam. CPA’s or attorneys with the LLM or MST degree in taxation is also evidence of extensive training. The LLM is an advanced tax degree for lawyers and the MST is a Master’s Degree in Taxation.
Fees are also a consideration. While this is not necessarily the type of service where you want to use the low bidder, it is reasonable and wise to ask for a fee quote or range. In complex situations, a seasoned tax pro may be hesitant to quote a fixed fee, and instead offer their hourly rate with a fee range not to exceed a certain amount. If you’re seeking a tax professional because you haven’t filed in years, expect to pay a higher retainer. But for filing delinquents, paying a retainer to a qualified professional may be the best money that one can spend.
If you currently have a tax preparer, these signs that may indicate that it’s time to move on. If you are automatically put on extension by your preparer, that’s not a good sign unless you have tax information from pass through entities such as partnerships, trusts or S Corporations that is routinely late in arriving. If your situation is straightforward, and you get the information to the preparer by April 1, your return should be ready for timely filing by April 15.
If you get frequent notices from the IRS, or commonly find errors in the return, consider a switch. I’d also change if your preparer is very lax about the rules. You may think that the tax preparer who accepts estimates of deductions rather than demanding the required documentation is your pal– but that is someone who could land you in big trouble. Even if you hire a preparer, you are responsible for the information on the return– so choose wisely.
John P. Napolitano CFP®, CPA is CEO of U. S. Wealth Management in Braintree, MA. Visit JohnPNapolitano on LinkedIn or uswealthnapolitano.com. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor. US Wealth Management, US Financial Advisors and LPL Financial do not offer tax advice. John Napolitano is a registered principal with and securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through US Financial Advisors, a Registered Investment Advisor. US Financial Advisors and US Wealth Management are separate entities from LPL Financial. He can be reached at 781-849-9200.