Tax Preparer Requirements and things to watch out for

When you selected the tax preparer that you currently use, what type of questions did you ask this person?  How did you find out whether this person who is trustworthy or not?  In the last few weeks, I have read many articles that are stating that Enrolled Agents are the only people who you can trust to do your taxes.  In my opinion, you need to go a little deeper than only looking at the training of the person.  You need to find out the person's journey as well as his history.

The IRS has a new program that started in 2014 called the Annual Filing Season Program.  This is a voluntary program that all tax preparers who are not attorneys, certified public accountants or enrolled agents are eligible to join.  To be eligible for this program you must register with the IRS as a tax preparer and obtain a PTIN or Preparer's Tax Identification Number.  You must also take at least 18 hours of a refresher course.  (I live in California, my state requires 20 hours in a CTEC approved educator course).

In California, the state that I am licensed in, in order to become a tax preparer, you must do the following.  First, you must take a 60 hour course from a CTEC approved provider within 18 months of applying.  Second, you must purchase a $5,000 tax preparer bond from an insurance/surety agent.  Third, you must obtain a Preparer's Tax Identification Number.  This requires you pay a fee to the IRS of $50.  Lastly, in California you must register with CTEC and pay their $33 fee.  Each year in order to renew, we are required to take a 20 hour refresher course.

By requiring all of the fees and education, the IRS and CTEC in my state, have done all that they can in order to make sure that unqualified preparers and preparers who are dishonest are weeded out.  However, you know just as well as I do that there will be ones who get through and are going to be out there.  There are dishonest people in all of the designations that the IRS has - Attorneys, CPA, Enrolled Agents and Tax Prepaerers.  In my opinion, you need to protect yourself by asking questions.

Check the person's qualifications - Does your preparer have a PTIN?  All preparers are required to have a PTIN.

Check the preparer's history - Does the Better Business Bureau have any reports of questionable returns or shady dealings with any clients?  For those with a licensing board, you should check whether or not his/her license is current and whether he/she had had any complaints.

What is the preparer's fee structure?  Watch out for any preparer who's fees are a percentage of your refund.  Reputable preparers have fees based on the documents that they prepared.  Also, you need to watch out for preparers who tell you that they can get a greater refund than others.

Check to make sure that the Preparer is accessible after tax season.  If the preparer is going to leave the country or move after that date, make sure you have a forwarding phone number and/or address.  Flying the coop is against the law.  It also is a red flag as to whether you want to use that person as a preparer.

The preparer should require information from you in order to do your return.  They should ask for forms you have recieved in the mail.  They should ask for your financial records or should ask for summary of your financial records when they interview you.  If they do not, it is a sure sign that they are making numbers up and might be falsifying records.

The preparer should never ask you to sign a blank return.  The preparer can be assessed a fine just for asking you to do this.  Besides, how do you know what the preparer is going to fill in the blanks?  By signing the return, you are agreeing that you agree with it and are responsible.

Make sure you review the entire return before you sign it.  The preparer also must sign the return and put his PTIN on the form.  If the return is being electronically filed, the EFIN must put a pin on the return that only they know.  This is called their electronic signature.

Current CTEC Regulations