Working with a Tax Pro – Avoiding Fly-By-Night Outfits

by in Tax Issues

I just got a disturbing question on the TaxQuips Forum this week. A young girl went to a tax preparer who didn’t have a clue, messed up her tax return, left her owing money to IRS when she should have had a refund, then disappeared when she returned to get help.

This is distressing on so many levels. It’s horrible that anyone should be unprotected when it comes to something as important and confidential as filing your tax return. Tax pros like that are also apt to be criminals, simply there for a little while to rake in the cash – and to gather Social Security numbers and financial information for identity theft purposes. And don’t think I am exaggerating. The Treasury Inspector General for Tax Administration (TIGTA) just released a report that estimates tax fraud at over $5 billion – with identity theft comprising a substantial part of that fraud.

How can you protect yourself?

1)    Start by finding a tax professional who has recognized, respectable tax credential

  1. Enrolled Agent (EAs)– get their authority directly from the U.S. Treasury and are enrolled to represent taxpayers before the IRS and to handle all tax issues. They may work in any state, since their credential is from a federal agency. EAs are the only tax professionals that take at least 16-24 hours of tax courses every year.
  2. Certified Public Accountants (CPAs) – get their authority from their state CPA society. They may issue certified financial statements, prepare tax returns and represent taxpayers before the IRS. They may only practice in the state(s) where they are licensed, or other states that have reciprocity.
  3. Tax Attorney – Attorneys are licensed by their state Bar Associations. Attorneys have broad areas of practice. You definitely want someone who is a member of the Taxation section of the Bar Association. Like CPAs, attorneys may only practice in the state(s) where they are licensed, or in states that have reciprocity.
  4. Registered Tax Return Preparers – This is a new license from the IRS. IRS has finally arranged to take control of this wild and wide-open field and start testing tax professionals and establishing education requirements that must be met by December 31, 2012. This is essentially, the new, fundamental license that all paid tax professionals must have if they are not EAs, CPAs or Attorneys. To date, out of 399,000 provisional tax return preparers who need to get licensed, less than 100,000 have passed the required exam.
  5. See a comparison of the education and licensing requirements.

2)   Make sure your tax professional is a member of a national tax or accounting association or society, like NAEA, NATP, NSA, AICPA, the Bar’s Taxation Section, etc. Being a member means they must take even more tax courses than their minimum requirement for licensing. It also means they are exposed to more tax news and information.

3)    Select a tax professional that has been in business in the same location for many years. Folks that move around each and every year? You have to wonder about their reliability – and if you’re going to find them when you need them.

IRS is building a database of ALL tax professionals. By next year, you will be able to look up the tax pro of your choice and see if his or license is in good standing, if complaints have been filed, if they are under sanction or disbarment.

For this year, if you’re really not sure, but would like to hire someone? You can contact the IRS Office of Professional Responsibility or the IRS Return Preparer Office and ask if they are in good standing.

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About the Author - Eva Rosenberg

Eva Rosenberg, EA, founder of the popular tax advice site,, is a nationally syndicated Dow Jones columnist at, an author and popular speaker and instructor. Please join the TaxMama family and get answers to your own tax questions.


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{ 1 comment… read it below or add one }

Carrie Rocha August 29, 2012 at 9:45 pm

This is SUCH useful information! I was naive to the idea of a tax preparer stealing identities, but it makes sense. Thanks for all the tips.


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