How to choose a Tax Preparer

Currently, there is no federal credential standard as to who can file your tax return. Anyone can apply for a PTIN (preparer tax Identification number) without having credential or background. BUT !!! By Federal Tax Code, anyone who is paid to prepare or assists in preparing federal tax returns must have a valid Preparer Tax Identification Number, and must sign and include their PTIN on any tax return they prepare.

 

All who decide to enter in the realm of tax preparation or subject to the rules and penalties whether paid or unpaid, legal or not legal because they are dealing with taxpayer sensitive information as well as the income reporting to the IRS.

With Fraud and Identity theft increasing and no credential standard, the tax payer is tasked with researching their best options.

Types of Tax Preparers​

(You can look up all PTIN holder tax preparers on https://www.ptindirectory.com/ )

The Fraud Tax preparer

Fraud tax preparers try to be invisible to the IRS by not signing the tax return (Failure to sign return – IRC § 6695(b):2025 penalty $60 each offense). They will prepare a return and will print the return and get the taxpayer to sign and mail it, or they will create a login for a free file online service, like TURBO TAX, to make it appear as if you filed your own tax return. The IRS tracks the tax return of each paid preparer via the PTIN, so a fraud preparer will not attain one of their own.

Unscrupulous tax return preparers may also:

• Require payment in cash only and not provide a receipt.

• Lure clients with "hook up" by misquoting a refund amount and pretending to use knowledge to increase the refund.

• Post up illegal signs on strett medians and corners with only a phone number stating how much a taxpayer will per child. (By law no legal tax preparers can make any guarantees about tax refunds.) 

• Misquote or lie about the tax code.

• Only give you the copy of the 1040 and not include the schedules

  (Failure to furnish identifying number – IRC § 6695(c): Penalty is $60 for each failure of a tax preparer to include a preparer tax identifying number (PTIN) on a tax return or claim for filing year 2025.

• Give untrue copies of the tax return to hide exorbitant fees. Price gouging

• Invent income to qualify their clients for tax credits.

  (Failure to file correct information returns – IRC § 6695(e): Penalty is $60 for each failure of a tax preparer to include correct information on tax returns for filing year 2025)

• Claim fake deductions to boost the size of the refund.

  Failure to be diligent in determining eligibility for certain tax benefits – IRC § 6695(g): Penalty in calendar year 2025 is $635 for each failure of a tax preparer to determine a taxpayer’s eligibility for the head of household filing status and the following credits:

  • Any dependent credit including the Additional Child Tax Credit and Child Tax Credit

  • American Opportunity Credit

  • Earned Income Tax Credit

  • Lifetime Learning Credit

• Direct refunds into their bank account, not the taxpayer's account.

  (Negotiation of check – IRC § 6695(f): Penalty in calendar year 2025 is $635 for a tax preparer who endorses or negotiates any check payable to another person.)

• Understatement of tax liability

  (The penalty is $1,000 ($10,000 for a corporate tax return) for helping underestimate a person’s tax liability on their tax return.)

• Unauthorize disclosure & consent form to use your information to file your taxes

  (The penalty is $250 for each unauthorized disclosure or use of information given to a tax preparer to prepare a tax return. $1,000 for each use if it leads to fraud.)

  
  

Fly-by-Night Tax Preparers - Can prepare taxes, but cannot represent you before the IRS. They are limited to data entry and basic tax preparation, and are often not available year round. They have a PTIN registered with the IRS. Fly-by-nights often " do taxes on the side" as a quick hustle.

They may not be able prepare complex tax returns. Some may charge EXORBITANT FEES and target the low income for high prep fees and bank products because they tend to have higher refunds due to earned income credit. If a person who doesn't have their MAIN PROFESSION in Business, accounting, finance, bookkeeping, or the like, you may want to think twice before using them as a tax preparer regardless of how low their fees seem to be.

AFSP Tax Preparers - These are tax preparers who voluntarily tax the 18 hrs tax code updates, ethics, & preparation course followed by the IRS exam. The results are reported to the IRS and the tax preparer is recognized as a tax professional. They may or may not have an accounting background. They may or may not have a degree in accounting, finance, or business. They have the choice of being seasonal or being available year round depending on their knowledge base and intentions.

Accountants - Have a college degree (typically in Business Management, Accounting, or Finance). They are familiar with the Generally Accepted Accounting Principles (GAAP) od the U.S. Duties include:

• Tax Prep, Tax advice, and tax planning.

• Financial projections for the business's future.

• Oversight and recommendations regarding company spending.

• Has limited abilities to represent before the IRS.( Have to opt in the IRS AFSP to represent clients)

(EA's) Enrolled Agents - may or may not have a college degree. May or may not be accountants. They tend to focus strictly on taxation. They have paid for EA Classes and have paid for the 3 part IRS exam to achieve their credential. Their duties include:

• Being Federally recognized to service all states and territories, and not limited by state jurisdiction.

• Must be proficient in individual and business tax prep, Federal Tax planning, & Representation.

• Must take the IRS required coursework and pass all three parts of the IRS Special Enrollment Examination.

• Can represent you before the IRS. 

CPA's - Typically have a Master's degree in Accounting and have to pass the Certified Public Accountant Exam for their state they are practicing in. Education hours will include more than taxation knowledge, as it may not be the primary focus of their practice. The difference between a CPA and a regular accountant is that only CPAs can write an audited financial statement, such as a balance sheet or income statement. They can represent you before the IRS. To look up a CPA, go to theebsite https://cpaverify.org  or https://us.aicpa.org/forthepublic/findacpa

Tax Attorney's - Typically are accountants who also have Law Degrees in tax law. They are licensed by the state courts, District of Columbia, or the State Bar. You would not go to them for tax preparation as they use accountants in their firm to perform those duties. They are consulted in cases of criminal issues with the IRS or State Revenue departments, tax debt settlement appeals, Business taxes, Business structure tax shelters, etc.. You can look up a Tax Attorney by going to the Bar Association in the state they practice in. https://www.americanbar.org/