Hiring a Tax Professional- How to Know They Are the Right Fit

How can you know you are hiring the right tax professional? This is an important question that should not be taking lightly. Hiring a tax professional, for most people, is not something they do every single year. Most people want to find someone who they feel is a good fit for their needs and stick with that person until that person is no longer in the industry, or until the relationship is no longer a good fit for them.

This means that on average, a taxpayer will search for a new tax professional a total of 3-5 times in their lifetime at the most. So, if there was a guideline to help a taxpayer find a tax professional that is the right fit for them that could potentially be a lifetime relationship it would be super beneficial to use. Well, here is that guide for you.

I want to give you five tips to help you find a tax professional that will be a good fit for your needs no matter what those may be.

  1. Do you need someone once a year or do you need to be able to check in with them throughout the year as things may come up?

When hiring a tax professional if you need someone that you can check in with throughout the year, then you need to make sure to ask what their off-season hours and schedule are like. If you need to be able to check in, then you need to make sure you are not hiring someone who only is in their office January through April and August through October and not available at all the other four months of the year. If you have simple and basic needs and don’t check in with your tax professional during the year, then someone whose office is closed four months out of the year is not a bad thing for you.

2. If your tax professional makes an error on your tax return how do they handle it?

A licensed tax professional, like an Enrolled Agent, CPA or Tax Attorney, are going to have what is known as Errors and Omissions Insurance. This insurance is your comfort blanket, if they have the right coverage amounts. This insurance covers the tax professional in the event they make an error or omit information they were aware of. This means that in turn, it protects you if they make an error or omit information as the insurance will cover any liability they have in the event they can’t cover it with the cash they have in the bank. A million dollars in coverage is the industry standard, and if you are speaking with someone who does not have at least that amount or can’t verify that they have coverage at all, then you want to be careful if you decide to work with them. Without insurance, if they make a mistake that could potentially cost you thousands of dollars with the IRS or State taxing authorities in tax, penalty and interest, then they will most likely not be able to cover it and this means that the IRS will pursue collecting from you and your tax professional could just disappear on you.

Always make sure you know what happens if an error on the tax professionals part occurs. If you ask for proof of their errors and omissions insurance, they should be able to provide it very easily. If they are unable to provide proof, be wary. Also, if they tell you their coverage is through a company that you are familiar with their name (i.e. Farmer’s, American Family, etc.) then chances are they don’t have the proper coverage as these companies do not offer the right type of insurance that a tax professional should carry.

3. Are they going to sign the return as your paid preparer and what are their credentials?

Tax preparation is one of the few professional fields that are not yet regulated. This means that your neighbor could prepare tax returns and have no education or credential to do so. If your tax preparer is not going to, or has not signed your return, then chances are they don’t have even the most basic credential, which is a PTIN. A PTIN is a Preparer Tax Identification Number and to sign a tax return as a paid preparer, one must have a PTIN. You can search your tax preparer to see if they hold the required PTIN here on the IRS website. This is the first step. The next step is to ask what education they have and what credentials they hold. Don’t get me wrong, there are some tax preparers out there who do not have a designation, but do know what they are doing. They are the ones who have been preparing taxes for several years and obtain education annually even when not required to. However, most tax professionals do hold some sort of designation.

Enrolled Agent– Federally licensed tax professional who is empowered and authorized by the IRS to prepare taxes and to represent their clients before the IRS for tax issues including audits, collections and appeals.

CPA– an accounting professional who has passed the uniform CPA exam and have met state certification and experience requirements as required by their state.

Tax Attorney– specialists in rules and policies pertaining to tax law and the process of taxation as it relates to estate transfers, material and intellectual property acquisitions, income from all sources and business transactions.

Now even further, each professional, regardless of their designation, is going to have a specialty. Make sure you find someone who specializes in what you need with your taxes. Make sure you are hiring a tax professional that understands your industry.

4. In the event of an audit, will they work to represent you and what does that look like?

Audit Tax Representation

If a tax preparer does not have a designation as described above, then they will not legally be able to represent you in the event you are audited. IF having the same person that prepared your taxes work with the IRS to explain them is important to you, then you need to go with a licensed professional.

Furthermore, you want to know what their audit fees are and how they expect you to work through that process with them.

Asking if they offer audit protection is another important thing you want to know in advance. If they do, it may be worth it to purchase it every year. Even if you don’t use it for nine out of ten years, the fees you pay for all ten years are usually quite a bit less than what that one year of audit fees could potentially be.

5. What does working with them look like? Time frames to complete returns, anticipated fees, consulting throughout the year, what they expect of you and what you can expect of them are all important.

If you are someone who likes to get your return done timely and hates to file extensions, it is important to know what their drop-off deadline is to avoid an extension. If you want to file an extension, when do they do that and what do they provide you to show it has been filed?

Knowing an estimate of the fee you can expect to pay is a good thing to know upfront. Most tax professionals cannot give you an exact fee until the return is done, but a ballpark should be able to be provided and should be close to the final fee. If the fee changes for some reason such as income that was not discussed in your consultation, they should be communicating that with you.

How do they charge for questions you have during the year? You don’t want to email them a question only to be surprised with a bill for $200.00 for answering it.

You should also know how they expect the information to be provided. If you bring in receipts is there an extra fee for sorting, organizing and totaling those or is that part of their fee? What identification verification do they require to have you provide?

The IRS is enforcing verification and substantiation requirements on tax preparers to claim certain credits on tax returns. This means that your tax professional may be required to ask for more documentation than previously. Make sure you know what they will need so you can provide it up front and eliminate as many delays from back and forth needs as possible.

This guide is by no means an all-inclusive guide to hiring a tax professional, but it is a good foundation to start with to make sure you are hiring the right person for your tax needs. You can also download this list of the Top Ten Questions which will expand on the five listed above. At True Resolve Tax Professionals, we like to make sure our clients feel they have a long-term relationship with our office and staff and that they are comfortable in the relationship. Taxes are complicated, life shouldn’t be. We don’t want to complicate your taxes or life anymore by not being a good fit for your needs.