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IRS advises taxpayers to choose a tax return preparer wisely


IR 2015-124

Noting that there is still some time before the next tax filing season, IRS has advised taxpayers to make use of that time to consider the appropriate options in choosing a tax return preparers.

Basic advice.IRS provides some basic tips that taxpayers can keep in mind when selecting a tax professional and filing their returns:

…Select an ethical preparer; taxpayers entrust some of their most vital personal data with the person preparing their tax return.
…Check on the service fees up front; avoid preparers who base their fee on a percentage of the refund or those who say they can get larger refunds than others.
…Ask the preparer whether he has a current Preparer Tax Identification Number (PTIN); paid tax return preparers must have a current PTIN to prepare a tax return.
…Research the preparer’s history; check with the Better Business Bureau, or, for the status of an enrolled agent’s license, check with the IRS Office of Enrollment. For certified public accountants, verify with the state board of accountancy, and, for attorneys, check with the state bar association.
…Ask for IRS e-file; any paid preparer who prepares and files more than 10 returns for clients generally must file the returns electronically.
…Provide records and receipts; do not use a preparer who, against IRS e-file rules, is willing to e-file a return using the latest pay stub instead of Form W-2.
…Review your tax return and ask questions before signing; taxpayers are legally responsible for what’s on their return, regardless of whether someone else prepared it.
…Never sign a blank tax return; the preparer could put anything they want on the return, even their own bank account number for the tax refund.
…Ensure the preparer signs and includes their PTIN; the preparer must also give the taxpayer a copy of the return.

To help taxpayers determine return preparer credentials and qualifications, IRS offered the following information:

  • Any tax professional with an IRS PTIN is authorized to prepare federal tax returns.
  • Enrolled Agents—licensed by IRS—are subject to a suitability check and must pass a three-part Special Enrollment Examination, which is a comprehensive exam that requires them to demonstrate proficiency in federal tax planning, individual and business tax return preparation and representation. They must complete 72 hours of continuing education every three years.
  • Certified Public Accountants—licensed by state boards of accountancy, the District of Columbia and U.S. territories—have passed the Uniform CPA Examination and completed a study in accounting at a college or university and also met experience and good character requirements established by their respective boards of accountancy. In addition, CPAs must comply with ethical requirements and complete specified levels of continuing education in order to maintain an active CPA license. CPAs may offer a range of services; some CPAs specialize in tax preparation and planning.
  • Attorneys—licensed by state courts, the District of Columbia or their designees, such as a state bar—generally have earned a degree in law and passed a bar exam and have on-going continuing education and professional character standards. They may also offer a range of services; some attorneys specialize in tax preparation and planning.

Representation rights.Taxpayers can designate their paid tax return preparer or another third party to speak to IRS concerning the preparation of their return, payment/refund issues and mathematical errors. The third party authorization checkbox on Form 1040, Form 1040A and Form 1040EZ gives the designated party the authority to receive and inspect returns and return information for one year from the original due date of the return (without regard to extensions).

Enrolled agents, certified public accountants and attorneys have unlimited representation rights before IRS. Tax professionals with these credentials may represent their clients on any matters including audits, payment/collection issues, and appeals.

Preparers without one of these credentials (also known as unenrolled preparers) have limited practice rights. They may only represent clients whose returns they prepared and signed, but only before revenue agents, customer service representatives, and similar IRS employees, including the Taxpayer Advocate Service. They cannot represent clients whose returns they did not prepare and they cannot represent clients regarding appeals or collection issues even if they did prepare and sign the return in question.

For tax return preparers that have an active PTIN (PTIN holders) but no professional credentials and do not participate in IRS’s Annual Filing Season Program (AFSP, a voluntary program requiring a certain number of continuing education hours), this is the final year that they will have those limited representation rights for returns they prepare and sign. For returns prepared beginning Jan. 1, 2016, only AFSP participants will have those limited representation rights.

References:For who is a tax return preparer, see FTC 2d/FIN ¶  S-1117  ; United States Tax Reporter ¶  77,014.24  ; TaxDesk ¶  867,002  ; TG ¶  71753  . For standards of practice, see FTC 2d/FIN ¶  T-10900  ; TaxDesk ¶  867,008  ; TG ¶  71758  .

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