Tax season is upon us — and if you haven't decided upon a tax preparer, now is the time to choose. Though you may be tempted to wait —especially if you anticipate owing money — wait too long and, before you know it, you may need to file an extension.
Tax preparers’ busiest time is from January to April 15. Tax preparers cram tons of work into a brief time. Tax preparation is a commodity, meaning there are plenty of qualified tax professionals out there.
Thanks to the internet, you are not limited to choosing a tax preparer who is in your geographical region. You can now choose people from around the United States or across the globe. So what differentiates one tax preparer from another? Here’s what I would look for:
1. What Qualifications Matter?
Look at their licenses and certifications. While these may not tell the whole story, they are a solid place to start.
Passing an exam shows they have met the minimum level of competency and have committed to learning through their education, continuing education, and passing exams.
Not to mention the financial price tag preparers pay for schooling, testing, continuing education, and licenses. You want to know the person handling your taxes is serious and has a license or certification that brings credibility.
Common designations for tax preparers include certified public accountant (CPA), attorney (JD), and enrolled agent (EA). CPA licenses and attorney licenses are state regulated. EAs are regulated by the Internal Revenue Service (IRS).
Anybody who prepares tax returns for compensation must obtain a preparer tax identification number (PTIN) from the IRS. Some states offer databases to search for licensed CPAs and attorneys.
You can search for tax preparers here. The Better Business Bureau (BBB) maintains its own database. For more information about tax preparers from the BBB, click here or check out what the IRS has to say.
2. Experience Is Essential
Like anything in life, experience matters. We learn and improve any skill with practice. Experienced tax preparers are exposed to more situations as a result of each return they complete.
Each individual set of circumstances and outcomes provides a tax preparer with more practical know-how. On the flipside, some seasoned tax preparers are burnt out and can’t wait to retire.
Younger professionals may be less experienced, but fresher, more energetic, and more enthusiastic. They may ask more questions, be open to the latest ideas, and could even be more up to date on the new laws, rules, and regulations.
Whether experienced or inexperienced, credentialed tax preparers with proper schooling, licensing, and certification have basic proven competence and knowledge in the field.
They are familiar with most tax topics. One other question to consider: Are you looking to build a long-lasting relationship? If so, working with a young professional may benefit you longer term.
3. In Tax We Trust
If you think about how much you must expose your personal life to your tax preparer — it should be an easy decision that this person must be someone whose character you trust without reservation.
Do you have a family member, friend, or business associate who is a tax preparer? That can be a smart place to start. That said, sometimes it’s not the best idea to mix business with family and friends, as it can cause stress and create friction in relationships.
If you don’t know a tax preparer, ask your family, friends, and business associates for a referral. Word of mouth is one of the best ways to go.
Ask yourself the following questions: Do I know this person? Do I trust this person? Does this person have integrity and character? How is this person’s reputation?
Some states have a website to verify licenses and publish disciplinary actions. Do some research online. Check social media. Google or Bing listings, Thumbtack, Upwork, or Yelp may have tax preparers.
Look at what others have to say. If a tax preparer has their own website with testimonials, it’s ok to ask if you can speak to the people vouching for them. Do your due diligence. Ask around.
4. What Is the Communication Protocol?
How will I communicate with my tax preparer? Will I be working directly with them, or will I be passed to another employee? Will I be working with a first-year associate or directly with a partner?
It’s important to choose a tax preparer who can communicate honestly and transparently and set clear expectations upfront.
Ensure you ask these questions so you know what you will get as a client paying for a service. Any tax preparer should be available, accessible, and responsive. Just like any other relationship — clear communication is important. Ask your practitioner to lay out what to expect.
5. What Services and Care Are Part of the Package?
Look for a tax preparer that will give you time, attention, and care regardless of how much money you have. Ask your tax preparer:
- Am I a priority?
- Will you answer the phone and respond to your emails?
- What’s a reasonable turnaround time?
- Does the business have another person you can contact in case of emergency?
Please note that all tax preparers are insanely busy during tax season. They may prepare hundreds of tax returns and work with hundreds of clients and businesses in a three-month span. So be reasonable, patient, and respectful.
I like to think of client service like this: under promise, over deliver.
When a client and tax preparer engage, most times the client will sign an engagement letter that lays out the terms of the engagement.
Terms vary, so be sure to read the engagement letter carefully before signing. You should feel free to ask any questions you have before signing the agreement.
6. Local vs. Long-Distance Relationships
Yes, we are still speaking about taxes! Do you want to meet your tax preparer in person (provided that’s an option during COVID-19) ? Or would you rather deal with Zoom, text messages, and emails? Whatever you decide, ensure the person you engage really exists — seriously.
7. Does Size Matter?
Yes, we are still talking about tax preparers — I can’t believe you would think otherwise. Ask yourself if you want to work with a solo practitioner, a small firm, a medium-sized firm, or a big firm.
There are currently four major accounting firms which are referred to as the “Big Four.” These firms work with the largest companies and wealthiest individuals in the world.
It depends on the level and sophistication of services you need and what you want in the short and long term regarding your relationship. You’re likely to get more attention with an individual or a small firm.
Larger firms may be better equipped to handle all your tax needs and may have access to the latest technology. Larger firms may be better able to handle more complex and sophisticated situations.
8. Do You Need Specialization or Other Services?
Do you work in a unique industry or field? Some tax preparers specialize while others are generalists.
If you’re looking for an “expert,” consider working with a specialist.
For example, some tax preparers work solely with freelancers, attorneys, real estate companies, or people in the United States on work visas from other countries. Some tax preparers may even specialize in international tax.
Think of it like going to the doctor for heart surgery. You would find a specialized surgeon.
Decide if you or your business need access to other services. For example, you may need help with bookkeeping, accounting, audits, payroll, and sales tax. Not all firms will be able to help.
Some individuals and firms only prepare tax returns while others offer a wide range of services.
9. To Fee or Not to Fee
How will you be billed or charged? Hourly rate? Flat fee? Does your tax preparer require a retainer, or a certain amount of money to be paid up front by you? Are they going to bill you for every email and phone call between you and the firm?
Keep in mind, this is customary practice at larger firms where practitioners keep track of their ‘billable hours’ and will typically round up a phone — for example — to the nearest quarter hour.
Some preparers are more laid-back while others keep detailed records of correspondence. Time is money, right? Do you need access to a tax professional all year long? Are you able to pay in installments or expected to pay all at once?
Make sure you inquire — and have in writing — your fee arrangement so there can be no misunderstanding between parties.
Here’s a quote that comes to mind: “If you think it's expensive to hire a professional to do the job, wait until you hire an amateur.” Meaning — good tax advice doesn’t have to break the bank, but you also don’t want to skimp and end up with a messy IRS audit.
The Bottom Line on Choosing a Tax Preparer
Money can buy peace of mind when it comes to a qualified tax preparer.
Like most things in life, choosing a tax preparer is about connection, relationship, and communication.
Do you enjoy working together or do you dread meetings and phone calls? Working with a tax professional is like working with a coworker. For the best outcome, you complement each other and enjoy each other’s company.
Each tax preparer has strengths and weaknesses. Evaluate the qualities that are essential to you, your spouse, or your business so you can make an informed decision.