Facts for Consumers from the Federal Trade Commission
Income Tax Preparation Services -- March 1993
This is the time of year when many Americans consider getting help from an income tax preparation service. These services, however, may vary greatly in accuracy and cost. The following information may help you decide whether you need a tax preparer and, if so, how to select the one that best suits your needs.
Do You Need a Tax Preparer?
Before you decide to hire a tax preparer, make sure you really need to pay for assistance. With help from a computer software package or the Internal Revenue Service (IRS), you may be able to do the work yourself. Your local IRS office will help you prepare an income tax form, or you can get answers to questions by using IRS free information resources. (See Free Resources, pg. 4). However, if you are unsure about how to do your taxes, or if your situation is too complex, you may find you want to consult a commercial tax preparer. The following information may help you comparison shop for a suitable one.
Types Of Preparers
Tax preparers differ greatly in education and training, so choose one carefully to ensure you pay only for the services you need.
An enrolled agent is certified by the IRS after having worked five years as an IRS auditor or after passing a government exam. Enrolled agents are authorized to represent you before the IRS.
A certified public accountant (CPA) has passed a professional qualifying exam. CPA's are also authorized to represent you before the IRS. A public accountant may have special accounting training, but lacks certification and cannot represent you before the IRS.
An attorney has passed the bar exam but may or may not have special tax training. Attorneys are authorized to represent you before the IRS.
Any other individual described as a "tax preparer" may or may not have special training or experience. Some tax preparation firms require that their staffs have extensive training and experience, while others have less rigorous requirements.
Choosing A Preparer
The more complex your tax situation, the more you may want the advice of someone with specialized experience. However, you may be charged more for the advice of these professionals. Many taxpayers, such as retired people, owners of small businesses, professionals, and people with large amounts of income from sources other than wages and tips, may especially benefit from using a preparer with specific experience in their area. To find the preparer that best suits your needs, call several and ask:
What is your training or experience in preparing tax returns, especially in a specialized area?
How do you check for accuracy? Will my return be reviewed for arithmetic errors only or also for errors in tax-law interpretation?
Approximately how much will you charge to prepare my taxes?
Can you file my return electronically?
Where can you be reached later in the year, if I need help with an audit?
Can you represent me if the IRS audits my return? What will you charge?
What To Expect
When you visit the preparer, expect certain practices. A preparer should go through a checklist of deductions to see if any apply to you. A preparer also should sign your return and enter his or her name and social security number (or federal identification number).
A preparer should not guarantee you a refund before completing your return or suggest that you take nonexistent deductions or propose other improprieties. A preparer should not ask you to sign a blank return or one completed in pencil.
It's Up to You
Even though you have hired someone to prepare your return, it is your responsibility to make sure your return is accurate. You are personally liable for any additional tax, interest, or penalty, even if you have a written guarantee that the preparer will pay any interest or penalty you are assessed as a result of his or her work. Here are some ways to help you get the best possible work done on your returns:
Before you visit the tax preparer, read your tax booklet or the more comprehensive IRS publication Your Federal Income Tax (publication #17). It is available free from the IRS Forms Distribution Center in your area.
Before you visit the tax preparer, make a list of any tax-related questions that occur to you and ask about them.
Gather and bring to the preparer any information or documents that might apply to your taxes, including your last year's return. Remember, too much information is better than too little.
After your return is prepared, check it to make sure the information is correct.
You will have an advantage if you get your taxes prepared early. Your tax preparer will have more time to do a thorough job for you.
Free Resources
You may be able to take advantage of free tax preparation services in your area. The IRS provides tax assistance by phone and through many free publications. For more details, contact the IRS office in your area. The IRS also runs a Volunteer Income Tax Assistance (VITA) Program, which is designed to help the elderly, persons with disabilities, the non-English speaking, and low-income citizens. The IRS also operates a program, Tax Counseling for the Elderly (TCE), which is designed to assist those individuals 60 years of age and older. Call your local IRS office at 1-800-829-1040 to ask about the VITA or TCE location nearest you.
FTC CONSUMER & SMALL BUSINESS ADVISORY - PUBLIC DOCUMENT
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