The U.S. Tax Code is complex, so you'd think that tax preparers would need to meet certain education or experience requirements. But, in reality, almost anyone can become a tax preparer. The IRS requires a preparer tax identification number (PTIN), which you can get by filling out an online application and paying a small fee.
But if you want to ensure your tax preparer is really suited to the job and capable of keeping your business out of trouble with the tax authorities, look for these six qualities in their work and your relationship.
1. Industry Experience
A good tax preparer who understands your industry can provide advice on how to maximize tax deductions to save you money and take advantage of tax credits. They may also be able to make business recommendations that can improve your operations.
2. A Proactive Attitude
Tax preparers should be available throughout the year, not just at tax return time. They should offer timely advice about tax law changes, topics on the IRS's radar, and potential tax planning opportunities before it's too late. A proactive tax strategy can help you avoid surprises at the end of the year and potentially save tax money.
3. Effective Communication
Frequent communications are essential to share information, build trust, and create a relationship with your tax preparer. Look for a tax preparer that communicates clearly, openly, and often—both verbally and in writing.
4. A Track Record of Integrity
Tax preparers must handle your confidential information and tax returns professionally and are prohibited from disclosing that information to others. They must act ethically, not make false statements, or fail to disclose violations or misconduct they have been charged with.
Among other things, tax preparers cannot make changes to your tax returns or file returns without your approval, fail to sign returns they prepare, or misrepresent their credentials.
5. Organizational Skills
Tax preparers have to gather and organize a lot of detailed information to create tax returns. Your tax preparer should demonstrate attention to detail and strong organizational skills. They must be able to enter data into tax preparation software, collate tax return schedules, and share your returns with you on a timely basis.
Depending on the complexity of your tax return, completing your return may require several rounds of changes and multiple drafts of schedules. Your tax preparer should keep this under control, so you don't have to.
The IRS assesses penalties and interest if your tax return is filed late or you pay your taxes late. You should be able to rely on your tax advisor to be aware of all deadlines and get your returns filed on time.
Tax preparers face tremendous time pressures at certain times of the year, so don't wait until the last minute to get them what they need. Still, you want someone who can manage their calendar, make enough time for their clients, and educate you on what you need to give them and how to avoid being late.
Bonus Recommendation: A Professional License
A tax preparer may or may not be a Certified Public Accountants (CPA). CPAs are licensed, receive annual training required by state licensing boards, and must comply with professional and ethical codes of conduct.
CPAs can be great tax preparers, but not all CPAs specialize in taxes. Enrolled Agents (EAs) are licensed by the IRS and must pass a suitability check, achieve a passing score on a three-part exam, and get 72 hours of continuing education every three years. Certain attorneys offer tax preparation and planning services as well.
CPAs, EAs, and tax attorneys may represent clients on any tax matters before the IRS, including audits, payment issues, and appeals.
Other tax preparers have limited or no client representation rights. Depending on your business needs and budget, you can decide what type of tax professional best meets your needs.
When looking for a tax preparer, take some time to investigate their credentials and experience and get a feel for how they'll work with you. You'll share your business and personal information with them, so you need to feel comfortable that they're honest, qualified, and looking out for your best interests. Many of these qualities won't become apparent until you begin working with someone, so you may find that your first choice of tax preparer isn't always the right choice.