About a third of us hire tax preparers or tax advisors to file our tax returns, according to a recent NerdWallet survey, but hardly any of us know much about them.
A full 80% of people who used tax preparers never asked about the preparer’s credentials, according to the survey, and about 75% never asked if the preparer would represent them in an audit. That’s crazy, considering that hiring a tax preparer means sharing details about everything from your income, your bank accounts, your marriage, your kids — and your Social Security number.
So if you’re wondering how to find the best tax preparer near you, here are seven must-have qualities to look for.
Must-have #1: A Preparer Tax Identification Number
The IRS requires anyone who prepares or assists in preparing federal tax returns for compensation to have a PTIN. Note the phrase “for compensation” — volunteer preparers don’t need PTINs. Make sure your income tax preparer puts his or her PTIN number on your return — the IRS requires that, too.
Must-have #2: A CPA, law license or enrolled agent designation
A PTIN is relatively easy to get, so go a step further and get a credentialed preparer — someone who’s also a certified public accountant, licensed attorney, enrolled agent or who has completed the IRS’s Annual Filing Season program. The Accredited Business Accountant/Advisor and Accredited Tax Preparer are examples of programs that help preparers fulfill the Annual Filing Season Program requirement. These credentials all require varying amounts of study, exams and ongoing education.
How do you find a tax preparer near you with the credentials you want? One way is to search the IRS’s directory. It includes preparers with PTINs and IRS-recognized professional credentials. Volunteer preparers and preparers with just PTINs won’t be in the database.
Must-have #3: Friends in high places
Membership in a professional organization such as the National Association of Tax Professionals, the National Association of Enrolled Agents, the American Institute of Certified Public Accountants, or the American Academy of Attorney CPAs is always a good thing to have, as most have codes of ethics, professional conduct requirements and various certification programs.
Must-have #4: A reasonable fee
How much do tax preparers charge? The average fee for preparing a tax return, including an itemized Form 1040 with Schedule A and a state tax return, was $273 in 2014, according to the National Society of Accountants. The average cost to prepare a Form 1040 and state return without itemized deductions was $159.
Legitimate tax preparers often charge by the hour, so if you come across one whose fee is based on the size of your refund or who says he or she can get you a bigger refund than the next guy, those are red flags.
If the IRS is auditing you, tax preparers charge an average of $144 per hour to handle it, according to the National Society of Accountants.
Must-have #5: E-file
The IRS requires any paid preparer who does more than 10 returns for clients to file electronically via the IRS’s e-file system. If your tax preparer doesn’t offer e-file, it may be a sign the person isn’t doing as much tax prep as you thought.
Must-have #6: Willingness to sign on the dotted line
The law requires paid preparers to sign their clients’ returns and provide their PTINs. Never sign a blank tax return — the preparer could put anything on the return, including their own bank account number so they can steal your refund.
Must-have #7: Your back
Enrolled agents, CPAs and attorneys with PTINs can represent you in front of the IRS on audits, payments and collection issues, and appeals. Preparers who just have PTINs can’t — even if they prepared your return. Preparers who complete the Annual Filing Season Program can only represent clients in limited circumstances.
Availability is also crucial. Even after the filing season is over and your tax return is history, a good tax preparer will take your call, respond to your email, or welcome you for a visit.
Need help deciding how to get your taxes done? See our guidance on whether to use software or hire a tax preparer.
» MORE: Visit the IRS’s site to find a tax provider near you
Tina Orem is a staff writer at NerdWallet, a personal finance website. Email: torem@nerdwallet.com.
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