Personal Finance

What you should ask before hiring a tax preparer

Tax prep tips
Tax prep tips

The countdown is on! With less than a month before the April 15 tax filing deadline, it's a dreaded time for many who'd rather put the task of preparing their taxes on someone else.

About six out of 10 tax filers will pay someone else to handle their tax prep this year, according to the Internal Revenue Service (IRS). If that's what you plan to do, here are five questions you need to ask before hiring a tax preparer.

What are your credentials?

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A certified public accountant (CPA) has usually studied accounting at a college or university and passed a standardized CPA exam. He or she has a certain number of years of public accounting experience as required by the state's licensing board.

Enrolled agents (EAs) are licensed by the IRS and specifically trained in federal tax planning. They've either passed a comprehensive exam or worked at the IRS for at least five years in some capacity in which they're interpreting or applying the tax code.

Other tax professionals may have taken continuing education courses in accounting. The IRS recommends paid tax return preparers participate in a voluntary program that offers training in basic tax filing, ethics and federal tax law. (The IRS had required mandatory testing of paid tax return preparers, but those regulations were struck down by a federal appeals court last year.)

Some attorneys also specialize in tax preparation and planning. Attorneys should have earned a law degree and passed a bar exam and should be licensed by their state or the District of Columbia. The IRS provides a searchable database of tax return preparers who hold professional credentials it recognizes – including CPAs, EAs, and attorneys -- on its website.

Do you have a PTIN?

All tax preparers are required to have a Preparer Tax Identification Number (PTIN) if they are being compensated for preparing, or assisting in the preparation of all or substantially all of any U.S. federal tax return or claim for a refund. This includes CPAs, enrolled agents and other tax professionals. They're required to put their PTIN on your return.

How much do you charge?

Tax preparers fees can vary widely depending on where you live, the complexity of the return and the amount of time it takes to complete the necessary forms. According to the National Society of Accountants, the average tax preparation fee this year for an accountant is $273 for a standard federal tax return with a Schedule A for itemizing deductions, as well as a state return.

Enrolled agents may be less expensive, but their fees also can vary widely. Find out ahead of time what the total tax preparation fee will be. The IRS warns taxpayers to avoid preparers who base their fee on a percentage of your refund or those who claim they can obtain larger refunds than other preparers.

Also, always make sure any refund due is sent directly to you or deposited into an account in your name. If a tax preparer suggests another arrangement, look for another preparer.

Will you file my return electronically?

Most taxpayers e-file their returns, and the IRS says it is the fastest way to get your refund, usually in 21 days or less. Yet, as of March 6, the number of tax preparers who filed electronically had dropped about 4 percent compared to this time last year, according to the IRS.

Want to make sure your return is filed electronically? Go to the IRS website to find out if the tax preparer has been accepted by the IRS electronic filing program and is authorized by the IRS to prepare, transmit and process electronic returns.

CORRECTION: This version corrects that the IRS recommends paid tax return preparers participate in a training program.