How to Find the Best Tax Preparer for You

The IRS estimates that 60% of taxpayers use paid preparers. If you regularly turn to a tax pro to prepare your return, or if you are a first-time taxpayer who wants to work with a tax professional, understand your options so you can find the right person for your situation. 

You can have anyone – your uncle, your neighbor or your best friend – prepare your return. But if you’re paying for this service, the person must be registered with the IRS, and have a current preparer tax identification number (PTIN), which is an IRS number issued annually to eligible preparers.

Eligible paid preparers fall into different categories, depending on their education, certification by professional organizations and continuing education requirements.

• Attorneys. These professionals are licensed by states or state bars to practice law and are subject to continuing education requirements and a code of ethics. 
• CPAs. Certified public accountants are professionals who have passed the Uniform CPA Examination and been licensed by state boards of accountancy; they have continuing education requirements.
• Enrolled agents. These are individuals who have passed a three-part Special Enrollment Examination demonstrating competency in federal taxation and are then licensed by the IRS. They, too, have continuing education requirements.
• Annual filing season program participants. These are individuals who are not attorneys, CPAs or enrolled agents but have voluntarily completed an IRS program and obtained continuing education.
• Any other preparer with a PTIN. These are individuals who believe they have sufficient knowledge to prepare returns and have paid the fee to obtain a PTIN. They are not subject to any oversight by a state, a professional board or the IRS.

The IRS has a directory of preparers with PTINs. The registry includes attorneys, CPAs, enrolled agents and annual filing season program participants, but not preparers who merely have a PTIN but no other credentials. You can search for a preparer by credentials, zip code and distance from you.

When you visit a storefront preparer, such as H&R Block or Liberty Tax, you face an array of tax professionals, primarily enrolled agents, CPAs and attorneys. Likely you are assigned to the professional best able to handle your return.

Note: There are also enrolled retirement plan agents and enrolled actuaries who are preparers with PTINs. These experts aren’t used for consumer tax returns, although they are included in the IRS directory.

Obviously, the more qualified the person who is preparing your return, the more you’ll pay for the service. Fees vary considerably across the country, with the type of preparer you use, and with the nature of your return (i.e., whether you have a sole proprietorship requiring Schedule C, whether you have complex investment transactions, whether you own a lot of rental properties). Most charge a flat fee per return. For example, the average going rate for a Form 1040 with a Schedule A (for itemizing personal deductions) is about $350; the national average for preparing a basic return with no itemizing of deductions is less.

As a general rule, you’ll pay the highest fees to attorneys, followed by CPAs and then enrolled agents. The lowest fees are charged by annual filing season program participants and preparers without any special designation.

Money is only one factor in choosing a preparer; your preparation needs are paramount. See which type would make sense for you.

• Attorneys. It is best to use this type of professional for cutting edge tax issues that may require litigation. Using an attorney is also advisable if there are any issues that may involve criminal activity because disclosures by a client to an attorney are privileged (confidential).
• CPAs. These professionals are trained to handle complex tax matters or special issues (e.g., delinquent returns). They can represent clients through all levels of IRS interaction, including audits and appeals within the IRS. However, there is only limited privilege between a CPA and client for federal taxes; the privilege does not cover matters disclosed for tax return preparation. If a CPA suspects that there may be criminal issues, he or she may bring in an attorney for further disclosure.
• Enrolled agents. These professionals can handle most tax matters. They have unlimited representation rights before the IRS and can represent clients during IRS audits and appeals. They, too, have limited privilege with respect to federal tax matters.

You’ve decided which type of preparer to use. As you narrow your search, make sure you steer clear of anyone who may be unscrupulous and could create problems for you. (If the IRS suspects that a preparer’s actions are shady, the preparer’s clients’ returns may be under review.) Some tipoffs of shady behavior:

• Charging you on the basis of the size of a tax refund. This violates the code of ethics to which preparers must adhere.
• Offering to cash refund checks. Preparers are subject to penalties for doing this and merely making an offer to handle refund checks is shady. 
• Preparing returns without asking for documentation.
• Guaranteeing refunds, or at least no tax liability, without reference to a taxpayer’s actual situation.

If you have any concerns, check with the Better Business Bureau to learn if there have been complaints against a particular preparer. Also check for complaints against CPAs with the State Board of Accountancy; for attorneys, ask the state bar association.

If you’ve selected a preparer and your return is ready for filing, make sure the preparer’s PTIN and other information is on it and that you receive a copy of your return. If you don’t, there’s a problem and, with luck, it’s not too late to go to someone else.

And to make the best use of your preparer's time – and billable hours – be sure to gather all the information you need and your questions before you visit the tax pro you've chosen.