How To Know If A Tax Preparer Is Qualified
There are three types of tax preparers: The competent
, the incompetent and the unscrupulous. The reason? Except for California, New York and Oregon there are no standardized requirements for paid tax preparers.
In California, tax preparers who are not a licensed attorney, certified public accountant (CPA) or IRS enrolled agent (EA), are required by law to register with the California Tax Education Council (CTEC). All CTEC-registered tax preparers (CRTPs) must complete tax education courses each year and obtain a surety bond before they can prepare tax returns for a fee.
In Oregon, tax preparers must be licensed through the Oregon State Board of Tax Practitioners. Oregon tax preparers are required to pass a competency exam before they can prepare tax returns professionally.
In 2009, New York passed legislation to mandate that its tax preparers register with the state; however, proof of education on tax laws is not required. Maryland is also working to implement legislation it passed in 2008 to require state licenses for tax preparers.
Consumers in other states should be extremely careful when choosing a tax preparer. There is no oversight for tax preparers who are not an attorney, CPA or EA, which means the training, education and ethical standards these tax preparers go by are set at their own discretion.
Requiring tax preparer oversight on a national scale is an issue the IRS says needs to be addressed. On January 4, 2010, the IRS issued a proposal to set new registration, testing and continuing education requirements for paid tax preparers who are not an attorney, CPA or EA.
Hiring the wrong tax preparer could result in penalties, missed deductions and no protection against mistakes or fraud. In the eyes of the IRS, it is the taxpayer, not the tax preparer, who is responsible for the information listed on the tax return, no matter if the information is accurate or fraudulent.
Below are the top ten questions to ask tax preparers (A qualified tax preparer should be able to answer "yes" to all ten questions.):
1.Will you sign my tax return?
2.Do you have a written privacy policy? Can I get a copy of it?
3.Do you have proof of a tax preparer bond (Required for CRTPs) and/or errors and omissions insurance (Optional for tax preparers)? If not, what protections will you offer me and can I get it in writing?
4.If a situation should arise with the IRS, will you stand by your work?
5.Do you take continuing education courses on tax laws? Can you provide proof?
6.Can you provide me with a list of references I can contact about your work?
7.Will you be available after April 15th?
8.Have you ever prepared a tax return dealing with my situation?
9.Will you provide me with a copy of my completed tax return?
10.Will you go over the finished tax return with me?
by: California Tax Education Council