With the Tax Cuts and Jobs Act of 2017 now signed into law by President
Trump, three questions people are asking are:
- How does this tax law affect me?
- Will the tax law change my 2017 Taxes?
- Will I be able to prepare my own tax return considering my circumstances?
Even without the new tax changes, there exist easy-to-overlook deductions, and seemingly endless tax forms. This can lead to a great deal of confusion come filing time. If you feel like you could use some professional help with your return, you’re not alone—most people, more than half of taxpayers, hire a professional preparer, the IRS finds.
However, you need to pick your tax preparer carefully. You are legally responsible for the information on your return, no matter who prepares your return. Also think of Identity Theft which is rampant right now. You are trusting this person with your most personal information, including your income, children’s names, Social Security number, dates of birth, bank information—all of your financial life.
While many tax preparers provide outstanding service, the IRS receives reports each year of Taxpayer Fraud. Also everyone makes mistakes. Our current tax system makes it very easy to get it wrong.
Step 1: Different Types of Preparers:
There are no federal minimum competency, educational, or professional requirements for tax preparers. Just about anyone can be a tax preparer by law. Also, there are different types of tax professionals with different training, credentials and talent:
- Certified Public Accountants: As a CPA obviously I am a little prejudiced in this area. A CPA must generally have minimum of a Bachelors Degree (State of Florida requires 150 credit hours) and must pass a state professional qualifying exam and meet other state licensing criteria, can represent you before the IRS in the case of an audit, appeal, or payment or collection issue. Not all CPA’s prepare individual returns, so check first. Florida CPA’s must complete 80 hours continuing education courses very two years and must adhere to strict ethical standards.
- Enrolled Agents: Licensed by the IRS, these tax preparers can also represent you before the agency. Enrolled agents must pass a comprehensive exam covering federal tax planning, individual and business tax return preparation, and representation. They must also complete 72 hours of continuing education every three years. Many EA’s focus on a particular tax area, so be sure of their specialty matches your concerns.
- Tax Attorneys: Lawyers, should typically be sought out only if you are dealing with a tax dispute, facing a problem from an audit or unclear tax law, or doing tax planning, such as legally sheltering part of your income or estate. They can also represent you before the IRS.
- Annual Filing Season Program Participants: This voluntary program is for tax preparers who are not attorneys, certified public accountants, or enrolled agents. The IRS issues this title to preparer’s who complete 18 hours of continuing education courses in preparation for a specific tax year, including a six-hour federal tax law refresher course and test. These professionals cannot represent you before the IRS.
- PTIN Holders: This category pertains to individuals whose only tax credential is that of possessing a PTIN. Truth in fact, all tax preparers must obtain this number.This category includes all other tax preparers who have an active preparer tax identification number from the IRS, but have no professional license and do not participate in the Annual Filing Season Program. These preparers are authorized to prepare tax returns, may have taken tax preparation courses and earned designations such as an accredited tax adviser
Step 2: Check Out Your Preparer
You can use the IRS’s Directory of Federal Tax Return Preparers with Credentials and Select Qualifications to find a preparer in your area with the level of expertise you require, confirm his or her credentials, and make sure he or she has an up-to-date PTIN (anyone who is compensated for preparing a federal tax return must have one).
The IRS also suggests checking for disciplinary actions and the status of any credentialed preparer’s license. You can find both, if your preparer is a CPA, through the Florida Board of Accountancy and the Florida DBPR. If you are using an attorney, contact the Florida or County Bar where she or he practices. For enrolled agents email the IRS at email@example.com and the IRS will get back to you in a few days.
Be on alert for common red flags, including the boast that a preparer can get you a larger refund than the competition, or a promise of a certain refund without having seen any of your records or previous tax returns. And ensure that your refund is deposited directly into your bank account, not into your preparer’s account.
“You want to make sure your refund is obtained legitimately. If you get audited, you are on the hook. If the return contains fraudulent deductions, there can be serious consequences like being banned from taking the earned income tax credit in future years.”
A good preparer will need to see your records and receipts and ask questions about your finances. He or she should not use your last pay stub instead of your W-2 to complete your return.
Step 3: Ask About Fees
The so called “average cost of hiring a professional preparer” is misleading. However it is reasonable to ask the tax preparer for an estimate of what the cost of your return may be.
You can call the prospective preparer you’re thinking about using and ask about the fees. They should be able to explain the basis of their fee structure, i.e. hourly, flat fee.Tax preparers can give a price estimate after an initial interview, which shouldn’t cost a person anything.”