While millions of Americans choose to prepare their taxes on their own, many others prefer to hand over their tax preparation to a licensed, registered professional specializing in tax prep work. Using a tax preparer comes with a number of benefits, including the potential to minimize tax payments, increased accuracy on your tax return, a reduced risk of audit, and less time spent on preparing taxes yourself.
If you’ve never used a tax preparer before, you probably have some questions. Here’s a quick review of the common questions asked about tax preparers, and the essential information you need to know before hiring one.
A tax preparer is an individual who prepares your taxes and files tax returns for their client. This could be an individual or a business, depending on the preparer’s area of specialty. When you work with a tax preparer, they will request all your tax forms, receipts, and other documentation to minimize your tax obligation and ensure your taxes are legally filed.
Any preparer with an IRS Preparer Tax Identification Number (PTIN) is authorized to prepare and file federal tax returns on the behalf of their clients.
If you hire a tax preparer, you will need to submit a significant amount of paperwork and documentation to support their tax preparation efforts. This may include:
The IRS enforces a tax return preparer signature requirement when taxpayers hire a preparer to do their taxes. The reason for this signature requirement is to provide accountability for the return itself. By requiring a PTIN and signature from the tax preparer, the IRS has a known point of contact to approach if any questions or audits come up in the future.
As the taxpayer, this requirement protects you from liability if your taxes are improperly prepared. If you’re wondering, “Can a tax preparer file your taxes without your signature?” the answer is no: Even if the tax preparer handles your tax prep and filing, you still need to sign off on the return before it can be filed.
In cases where a taxpayer will be unable to prepare their own taxes for the foreseeable future—which can occur if a special needs individual is supported by income from a trust, or in cases where elderly taxpayers are in assisted living or nursing home care—it may be advisable for that individual to give power of attorney to a tax preparer.
This is a significant decision with important tax and legal implications and could create serious legal issues if there’s any risk of the IRS filing a criminal complaint in the future. For this reason, it’s advisable to consult with an attorney before handing over power of attorney to your tax preparer—or to any other individual or entity, for that matter.
Even though tax preparers are professionals in their field, they aren’t immune to simple mistakes. In many cases, mistakes on your tax return can be addressed by filing an amended return with the IRS. Your tax preparer can handle this since the original mistake was theirs.
In some cases, these mistakes can result in fees or penalties. Most legitimate tax preparers will compensate their clients for these fees or penalties to make sure there aren’t any financial disputes, or they might work with the IRS to reduce or eliminate those penalties and fees.
If you suspect that your tax preparer was unprofessional or malicious in their tax preparation, you may want to consider reporting them to the IRS. This can prompt an investigation into their business practices, and it may also protect you from penalties and fees resulting from that preparer’s behavior.
