Martin S. Kaplan, CPA, New York City. He is a frequent guest speaker at insurance, banking and financial-planning seminars and author of What the IRS Doesn’t Want You to Know (Wiley).
If you can do your taxes on your own, fine. But taxes have become so complex that you may want to rely on a professional. Now is the time to pick a good tax preparer for your 2009 return. Questions to ask a professional who might prepare your taxes…
1. Have you prepared returns for other people in my profession (or other retired people)? A taxpayer’s line of work might have tax implications with which the preparer should be familiar. Owners of small manufacturing businesses, for example, face substantially different tax issues than owners of small retail businesses. Actors and artists can claim deductions that the rest of us cannot. Retirees face different tax issues than those still in the workforce.
Follow-up question: Would you please provide a reference or two from clients who are in my field? These references confirm that the tax preparer really does have clients in your profession. Asking for specific types of references also forces the tax preparer to produce different references than the ones he routinely shares, and reduces the odds that these references are in fact mainly his/her friends.
2. Do you have experience with the specific complexities of my return? If your return includes anything out of the ordinary, such as a specific type of trust… a small business… a domestic partnership arrangement… or that you are living overseas as an expatriate, make sure that the tax preparer has dealt with this kind of matter in the past.
3. Are you a licensed CPA? Enrolled agent? Tax attorney? A CPA is a good choice because he has passed a series of tough state examinations, with a concentration in tax law. Enrolled agents are federally licensed tax specialists. A tax attorney has advanced training in tax law — usually a master of laws in taxation — and may have a background in accounting. Stick with tax preparers who have one of these designations. These pros must pass difficult exams and receive ongoing training.
4. Are you going to handle my return personally? If the answer is no, ask, “Will you at least carefully review my return before it is submitted?” and “How experienced is the person who actually will handle my return?” Either 10 years of tax-preparation experience or a CPA designation are good signs, and five years of experience should be the absolute minimum to expect of a tax preparer.
5. Do you use a computer to review returns before filing? Some old-timers still don’t use tax-preparation software. Avoid these preparers. The Tax Code is simply too complex to do without software to double check the tax preparer’s math and call potential errors and omissions to his attention.
6. Do you earn continuing professional education credits in taxation each year? If not, the tax preparer is not keeping his training up-to-date.
7. How do you handle charitable contributions, both cash and noncash? There is no single right answer here, but the question can help you determine whether the tax preparer’s level of aggressiveness matches your own. A conservative preparer might say that he expects you to have documentation for all of the charitable contributions you claim… a more aggressive tax preparer might suggest that you try to recall charitable contributions and claim them even if you lack documentation.
8. Will you represent me if I am audited? If the answer is no, find another tax preparer. If you must hire a new tax preparer to represent you in an audit, this replacement will have to take time getting to know your return, which means many more billable hours. It also is fair to wonder why the tax preparer won’t represent you. It is possible that this tax preparer has been in trouble with the IRS and has had his right to represent taxpayers before the IRS revoked. (Of course, this assumes that the tax preparer is an attorney, CPA or enrolled agent and thus qualified to represent clients before the IRS in the first place.)
9. Are you on the IRS mailing list (or e-mail mailing list) for the latest tax changes? The IRS sends out weekly updates on tax law, but some tax preparers don’t bother to sign up.
Follow-up question: What’s new in the tax law this year? In 2009, the tax preparer might mention the tax credit of up to $8,000 for first-time homebuyers… or that the credit for certain energy-saving home improvements is increased from 10 percent to 30 percent for 2009 and 2010.
10. Will you be able to fit me in as a new client? A talented, established tax preparer should not be able to take on many new clients because very few of his current clients should leave him each year. The accountant may have lost a few clients to relocations or death in the past year… he doesn’t really have time for new clients, but he will make an exception for you because you are a referral from an existing client… or the tax preparer is new at the firm or has just launched his own practice. Be wary if the tax preparer seems not to have a full roster of clients despite years in business… or simply adds additional assistants rather than turn away any clients, unless these assistants have excellent credentials.