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What Does a Tax Preparer Do & How to Choose the Right One for You?

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Tax season in the US can be daunting, given the complexities of the tax code and regulations. Many individuals and businesses find relief through the assistance of a qualified tax preparer. But what exactly do they do, and how do you choose the right one? Discover in this concise guide!

April 22, 2024
Author: NCH

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The Roles & Duties of a Tax Preparer

Tax preparers are professionals trained to assist individuals and businesses in accurately preparing their tax returns. Their responsibilities cover a wide range of tasks, including:

  • Gathering Information: Tax preparers collect relevant financial documents from clients, such as W-2 forms, 1099s, receipts for deductible expenses, and records of investments and charitable contributions.
  • Data Entry & Calculation: They enter the collected information into tax preparation software or forms, ensuring accuracy in calculations of income, deductions, and credits.
  • Maximizing Deductions & Credits: A key aspect of their role is identifying all eligible deductions and credits to minimize the tax burden for their clients legally.
  • Compliance Assurance: Tax preparers ensure that tax returns comply with current tax laws and regulations, reducing the risk of audits or penalties.
  • Client Consultation: They offer guidance and advice to clients on anything related to tax, such as strategies for reducing tax liabilities or addressing IRS inquiries.
  • Representation: In case of audits or other tax-related issues, tax preparers may represent their clients before tax authorities by advocating for their interests and ensuring compliance with legal requirements.

Categories of Tax Preparers

Tax preparers can be broadly categorized into two main types:

Enrolled Agents (EA)

Enrolled agents are tax professionals licensed by the Internal Revenue Service (IRS) to represent taxpayers before them. They have passed a comprehensive examination covering individual and business tax returns and must adhere to strict ethical standards. EAs are authorized to prepare and file tax returns for individuals, businesses, estates, and trusts, and they can represent clients in audits, appeals, and other tax-related proceedings.

Certified Public Accountants (CPAs) 

CPAs are accounting professionals who have met the education, experience, and examination requirements to earn the CPA designation. Although not exclusively tax experts, many CPAs specialize in taxation and offer tax preparation services to individuals and businesses. CPAs are licensed by state boards of accountancy and are authorized to represent clients in tax matters before the IRS and state tax authorities.

6 Qualities to Look for in a Tax Preparer

Trait #1: Credentials & Experience 

Look for tax preparers with relevant credentials, such as Enrolled Agent (EA) or Certified Public Accountant (CPA) designation. These credentials indicate that the preparer has undergone rigorous training and testing in tax preparation and is held to high ethical standards. 

Additionally, consider the preparer’s experience handling tax returns similar to yours, particularly if you have complex financial situations or unique tax considerations.

Trait #2: Attention to Detail 

It’s no secret that tax preparation requires high attention to detail to ensure accuracy and compliance with tax laws. A good tax preparer will meticulously review your financial documents and tax information to identify potential deductions, credits, and other tax-saving opportunities. This includes thoroughly documenting your income and expenses to support the figures reported on your tax return.

Trait #3: Knowledge of Tax Laws 

Tax laws constantly evolve, with new regulations and provisions enacted each year. A knowledgeable tax preparer stays abreast of these changes and understands how they may impact your tax situation. They should be able to interpret complex tax laws and apply them to your specific circumstances to minimize your tax liability while ensuring full legal compliance. 

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Trait #4: Communication Skills 

Effective communication is key to any professional relationship with your tax preparer. Your preparer should explain tax concepts and strategies clearly and understandably, keeping you informed throughout the tax preparation process. Expect them to be responsive to your questions and concerns and readily available to address any issues.

Trait #5: Ethical Standards

Tax preparers are entrusted with sensitive financial information and must follow strict ethical standards in their practice. Choose one who operates with integrity, honesty, and confidentiality and prioritizes your best interests. Avoid preparers who engage in unethical or fraudulent practices, such as promising inflated refunds or encouraging tax evasion.

Trait #6: Accessibility & Availability 

While tax season can be a busy time for tax preparers, your preparer must be accessible and available when needed. Consider a preparer who is responsive to your inquiries and can accommodate your schedule, particularly if you have tight deadlines or urgent matters to address. A reliable one will prioritize client service and make themselves available to assist you throughout the year, not just during tax season.

The Bottomline

Choosing the right tax preparer can significantly impact your financial well-being. Whether you’re an individual taxpayer or a small business owner, finding a qualified and trustworthy one can provide peace of mind and ensure that your tax obligations are met accurately and efficiently. By considering their credentials, experience, qualities, and ethical standards, you can make an informed decision and find a tax preparer who meets your needs and expectations. 

With expertise in corporate formation, registered agent services, and compliance management, NCH can provide the support and guidance needed to establish and maintain an LLC or corporation. Together with our team of EAs and CPAs, we can help you minimize your tax liability and maximize your tax benefits of doing business in Nevada.  

Call 1-800-508-1729 or visit our website to schedule your FREE consultation today!

DISCLAIMER: The above material has been prepared for informational purposes only, containing opinions of the provider and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. Please consider consulting tax, legal, and accounting advisors before engaging in any transaction.

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