An astonishing 80 million Americans pay a tax preparer each year, according to an estimate from Accounting Web. And while the IRS began to register those preparers in 2010 and had plans to implement competency testing and continuing education requirements, a 2014 court case ruled the agency didn’t have the legal authority to do so.
That means the current tax preparation landscape is something like the wild, wild West. Virtually anyone can slap on the label of “tax preparer” and set up business, regardless of whether they have any training in tax laws.
To help you avoid being taken for a ride by an inexperienced or incompetent tax preparer, Money Talks News finance expert Stacy Johnson spoke with Tom Sawyer, a CPA with Sawyer & Latimer PA in Fort Lauderdale, Fla.
1. Look for free tax preparation services
Before you even think about paying someone for tax preparation services, see if you’re entitled to it for free.
There are two IRS-sponsored free tax preparation programs: Volunteer Income Tax Assistance or VITA, and Tax Counseling for the Elderly. These programs give eligible individuals free tax preparation assistance from trained volunteers.
The VITA program is open to these groups:
- Individuals with incomes of $53,000 or less.
- People with disabilities.
- Elderly individuals.
- Those with limited English-speaking ability.
Meanwhile the TCE program is aimed at those age 60 and older, although people of any age may be able to receive guidance from program volunteers.
2. Consider using software to do it yourself
If you’re not eligible for free in-person tax preparation services, the next best thing may be to use a tax prep software program.
Depending on your income, you may be able to use software for free through the Free File program. If your adjusted gross income is $60,000 or less, head to the IRS Free File site to find software providers that will let you prepare and file your taxes for free using their programs. Make more than that? The IRS offers free electronic forms for everyone.
But even if you’re not eligible to file a free tax return, you may still want to use software to prepare your own forms. Remember, most preparers are simply entering your information into a software program of their own. Rather than pay hundreds to someone else, you could spend a lot less and use a program offered by TurboTax, TaxAct or H&R Block, among others, to do it yourself.
That said, there is still an argument to be made for paying a professional tax preparer. As Sawyer tells Johnson in the video above, software isn’t necessarily going to ask probing questions to ensure your return is as complete and correct as possible.
3. Interview several preparers
Let’s assume you’re not eligible for free tax prep assistance and you’ve decided not to go the DIY route. It could be you have a complex tax situation, or you’re simply more comfortable with a human touch.
You start finding the right pro by not stopping at the first preparer you come across. Tax preparers come with various backgrounds, personalities and education. Try to talk to at least three preparers before settling on the one who seems right for you.