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Five on Fridays: Tips on Choosing a Tax Return Preparer

It's everyone's favorite time of year again -- TAX FILING SEASON! With the new Federal Tax Law, many people who have previously prepared their own tax returns may be looking for a pro to handle their taxes in light of the new changes. Others may be looking to switch tax preparers altogether (for whatever reason). This week's Five on Fridays provides tips to consider when choosing a tax return preparer (or deciding whether to keep your existing one):

(1) Did you know that virtually anyone can prepare federal tax returns for compensation? You don't have to be a CPA or even have an accounting degree. Anyone who prepares or assists in preparing federal tax returns for compensation, however, is required to have a valid Preparer Tax Identification Number (PTIN). Yet, as long as you don't have a felony conviction and are current on your personal tax obligations, you can obtain a PTIN. Efforts by the IRS to impose educational requirements on preparers were rejected by the DC Circuit Court of Appeals in a 2014 case called Loving v. IRS. In Missouri, there are no professional standards or requirements for who can prepare taxes. Unlike states like California, Missouri does not regulate return preparers at all. In Missouri, you need a special license to braid hair for others, but not to do taxes. So, as a starting point, make sure your preparer has a PTIN.

(2) Make sure your preparer is signing (even electronically) the tax return. Check the bottom of the return to make sure the person who prepared your return is listed along with their PTIN. Some shady preparers omit their name from the returns they prepare to avoid detection as the paid preparer so they can later deny they had anything to do with the return. Or worse, they select the "self-prepared" option, leaving the taxpayers to have to explain that someone else had in fact prepared the return containing false information. So again, make sure the person who prepared your return is listed in the “Paid Preparer” space on your 1040.

(3) Ask questions of your preparer. What experience do they have in preparing taxes? Do they have a degree in accounting or any other special training or credentials? Do they prepare the returns themselves, or delegate to someone else?

(4) Google the preparer. Have they ever faced any sort of disciplinary action from the IRS or DOJ? Have they received any complaints or negative reviews on BBB, Yelp, or Google?

(5) Does your current preparer review your tax return with you? Most taxpayers simply sign their e-file authorization forms without reviewing and/or understanding what's actually on their returns. Make sure your preparer takes the time to review every line on your 1040 with you and explain what each line represents. Ask questions if you don't understand something. If they can't explain a particular line item on your return, they probably shouldn't be doing your taxes.

If you have additional questions about what to look for in choosing a tax return preparer, please contact Mark Milton at mark.milton@stltaxlawyer.com.

Mark Milton