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Your How-To Guide to Finding the Right Tax Professional for You

Aug. 26, 2021, 8:46 AM

I’ve been asked a lot of taxpayer questions over the years. But the one that stands out, reliably at the top of my inbox, no matter the time of year, is this: How do I find the right tax professional?

It feels like it would be an easy question to answer, but it’s not. Yes, I know a lot of tax professionals. And if it was just a matter of finding someone with credentials, it would be easy. But the reality is that knowing a tax professional and finding the right tax professional for a particular person are two different things.

Most taxpayers use a tax professional at some point—most commonly to prepare tax returns. According to the IRS, more than 92% of individual tax returns filed by June of 2021 were filed electronically, and of those, about 53% were filed by tax professionals. If you back out non-taxable returns filed only to qualify for Economic Impact Payments, you would likely see numbers closer to the 2018 and 2019 tax years, where tax professionals filed nearly 60% of all electronically filed returns.

That’s a lot. But those statistics only reflect paid federal income tax return preparers. They do not necessarily include tax professionals—like me—who do other things, like audit and controversy work, bookkeeping, and tax planning.

The right tax professional for you might be a paid preparer who focuses solely on simple individual tax returns. But you might need a preparer who works with small businesses year-round or one who is well-versed in cryptocurrency. Or it may be the case that you’re happy to prepare your own return, but you need help sorting out estimated payments or other tax considerations on an as-you-go basis.

You’re probably getting the picture that there is a lot to consider. And that’s precisely the point: There is no one-size-fits-all answer to finding the right tax professional for you. Finding the best fit can take time and patience. But considering what’s at stake, it’s worth the effort. Here are some steps to help you get started.

Ask for referrals

The best dal makhani in my area comes from a small restaurant off of Route 100: I know this because people I trust have consistently recommended it to me. When I want to know where to go for the best of anything in the area—from the best Indian food to the best florist—I’ve asked. That’s how you learn. So, do the same when you’re looking for a tax professional: Ask your lawyer, your investment adviser, your work colleagues, and your friends.

Do your homework

Once you have a recommendation—or three—do some follow-up. An easy place to start? Check out your tax professional online, since most reputable professionals will have some kind of presence on the internet, even if it’s only on social media. You should be able to get a sense of whether the services offered, like tax preparation or bookkeeping, are what you need, and whether the firm’s culture is a good initial fit.

Understand credentials

Letters following a name on a website do not always mean that a tax professional is qualified, but it can mean that the person has passed competency tests or has specific tax training. Here’s a quick guide to some popular credentials:

  • A certified public accountant (CPA) is certified by the state to act as a public accountant. All CPAs are accountants, but not all accountants are CPAs.
  • An Enrolled Agent (EA) is a federally licensed tax practitioner who may prepare returns and represent taxpayers before the IRS when it comes to collections, audits, and appeals.
  • Annual Filing Season Program (AFSP) participants are return preparers who have met voluntary requirements established by IRS.
  • A J.D. (juris doctorate) is a law degree, while an LL.M. (master of laws) is an additional law degree. Having a law degree doesn’t necessarily mean that an attorney prepares returns or has experience before the IRS.
  • A Volunteer Income Tax Assistance (VITA) preparer is trained by the IRS to prepare basic returns, typically for low-income or older people. Some may have special training to assist with military or non-citizen returns.

Most importantly, anyone preparing federal tax returns for compensation must have a valid Preparer Tax Identification Number (PTIN). The IRS maintains a searchable directory of preparers with a current PTIN who hold recognized professional credentials.

Set up a meeting

We may not be ready for in-person interviews yet, but most tax professionals are Zoom or call-friendly. Once you have some solid referrals, set up a time—well before tax season—to ask about their services and whether they’re taking on new clients. Some tax preparers are well-versed in Form 1040 basics, while others may specialize in schedules for real estate or small businesses. Others may focus on cryptocurrency or foreign income. This is the perfect time to ask about any special circumstances due to your financial investments, occupation, or residency. But be thoughtful: This isn’t the time to solicit free advice. Ask questions that will help you make a good hire, not resolve a pending tax problem.

Have a budget

Prices for services may vary depending on what you need and where you are located. Keep in mind that fees may be fixed or hourly, and may depend on the complexity of your return or controversy matter. While you shouldn’t rely solely on pricing, staying within your budget is important. Ask about fees upfront and discuss any concerns in advance.

Discuss geography

When it comes to federal income taxes, there are no boundaries. But that’s not true when it comes to state and local taxes, or SALT. Your state or locality may, like many in Pennsylvania, have quirky filing requirements, especially for business owners. It can get even more complicated if you’ve moved or if you live in one state and work in another—something that many taxpayers are facing due to the pandemic. You may also need additional guidance if you own a business or real estate in another state, or if you spend time outside of the country. Make sure that your tax preparer is familiar with—and can handle—your filing requirements.

Check your calendar

Your tax preparer should be upfront about the time to prepare and deliver your tax return—as should you. Because of my business, I am on an extension almost every year, and this is something that I’ve worked out with my tax preparer. If you know that you are an early filer, or have time restrictions, communicate that early and make sure that your tax professional agrees. The same is true for understanding when and what information you’ll need to provide in advance. If your tax professional can’t offer a reasonable window of time that works with your schedule, you’re better off finding someone else.

Anticipate the future

Many taxpayers assume that their tax needs end on Tax Day. But the reality is that taxpayers often receive notices from the IRS and other tax authorities throughout the year. Make sure that you know how to contact your tax professional after your return has been filed and understand what your tax professional is willing or able to do on your behalf if a problem comes up. If your tax professional doesn’t offer post-return services, that doesn’t have to be a deal-breaker, but you should understand the scope of services in advance.

Follow-through

The goal should be to establish a professional relationship—and that means one where you feel comfortable. A good tax preparer wants that, too. Once you’ve agreed on the terms of representation and laid out the ground rules, do your part.

**This is the second in a series on taxpayers and tax professionals. You can find the first in the series here.

This is a weekly column from Kelly Phillips Erb, the Taxgirl. Erb offers commentary on the latest in tax news, tax law, and tax policy. Look for Erb’s column every week from Bloomberg Tax and follow her on Twitter at @taxgirl.

To contact the reporter on this story: Kelly Phillips Erb in Washington at kerb@bloombergindustry.com

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