What we’ll cover:
Looking to maximize your deductions or credits? Need to talk through tax-saving strategies? Tax professionals could help you save both time and money during tax season. At the very least, they can rescue you from the stress of having to sift through piles of paperwork all by yourself.
You may have noticed that as your financial life gets more sophisticated, your tax returns have probably grown in complexity as well. So there comes a time when bringing in a tax professional to help with your returns can make a lot of sense.
Tax professionals aren’t hard to find, but you don’t want to just randomly pick one off the streets. It’s important to find a qualified, reliable and experienced tax preparer. Remember, this person will be sifting through your most sensitive personal information. That’s why it’s worth doing some research to find a tax preparer whom you can trust to handle your tax filing needs.
Also keep in mind that even if you use a tax professional, you are ultimately responsible for making sure that the information on your federal return is accurate. So be sure to ask any questions you may have.
That said, here are four tips to help you get started.
Before you pay someone to help you prepare and file your tax returns, check to make sure that they are legit. What do we mean by that?
The IRS requires all paid tax preparers to apply for and maintain a Preparer Tax Identification Number (PTIN). The PTIN lets you know that the tax preparer is authorized to handle your federal tax return. The number must be active and included when your tax preparer signs off your return.
Need to check whether your tax preparer has an active PTIN? The IRS maintains a list of PTIN holders, where you can look an individual up by state.
Not all tax preparers are created equal. Some will have more experience or expertise in certain areas of tax preparation.
Moreover, some tax professionals have what’s known as “representation rights,” which is the right to represent you before the IRS on certain tax matters. Some tax preparers have unlimited representation rights, while others have only limited rights.
Tax professionals with unlimited representation rights include enrolled agents, certified public accountants (CPAs) and tax attorneys. They may represent you before IRS on any tax matters – such as audits, appeals or collection issues.
Tax preparers who do not have those professional credentials but are participants in the IRS Annual Filing Season Program (AFSP) have only limited representation rights. That means they can only represent their clients (those whose tax returns they prepared and signed) in select circumstances – for example, before revenue agents and IRS customer service representatives.
On the other hand, tax preparers who simply have an active PTIN but no professional licenses – and are not an AFSP participant – generally cannot represent their clients before the IRS.
Since tax preparers come with different qualifications and specializations, it’s important to do your research and choose one that can competently handle your tax filing needs. Not only would this take off some of the stress around tax time, but it would also help give you the peace of mind in knowing that your taxes will be done correctly.
If you need help finding a tax preparer with specific qualifications, check out the IRS Directory of Federal Tax Return Preparers with Credentials and Select Qualifications (whew, what a mouthful). This database lets you search tax preparers by professional credentials.
Communication is important in any relationship. It’s no different when it comes to you and your tax preparer.
As you shop around and talk to different tax preparers, get to know their communication and working style. For example, how responsive would they be if you have any questions or concerns during the tax season? How often would they be able to meet in person? How much time would they need to complete your return? Will they maintain any tax records for you?
You get the idea. Basically, you would want to know what kind of specific support you can expect during and after tax season. Getting “ghosted” by your tax preparer after filing your return would be annoying, especially if the IRS has questions about your return.
Once you nail down their professional credentials, services and availability, it’s time to discuss fees.
Some professionals may charge you an hourly fee; their rates can vary widely based on their credentials. Others may opt to charge you based on the types of tax services they provide or the number of forms they have to prepare for you.
Then there are those whose fees are based on a percentage of your refund – the IRS generally recommends that you avoid this type of arrangement.
Although it doesn’t happen often, if you suspect your tax preparer of misconduct or fraud, you can report them directly to the IRS using Form 14157.
This article is for informational purposes only and is not a substitute for individualized professional tax advice. Individuals should consult their own tax advisor for matters specific to their own taxes. This article was prepared by and approved by Marcus by Goldman Sachs, but does not reflect the institutional opinions of The Goldman Sachs Group, Inc., Goldman Sachs Bank USA, Goldman Sachs & Co. LLC or any of their affiliates, subsidiaries or divisions. Goldman Sachs Bank USA and Goldman Sachs & Co. LLC are not providing any financial, economic, legal, accounting, tax or other recommendations in this article. Information and opinions expressed in this article are as of the date of this material only and subject to change without notice. Information contained in this article does not constitute the provision of investment advice by Goldman Sachs Bank USA, Goldman Sachs & Co. LLC or any of their affiliates. Neither Goldman Sachs Bank USA, Goldman Sachs & Co. LLC nor any of their affiliates makes any representations or warranties, express or implied, as to the accuracy or completeness of the statements of any information contained in this document and any liability therefore is expressly disclaimed.