Professional tax preparers stay current on federal tax code changes and deductions. They pay attention to detail and go through returns line by line to ensure accuracy.
In addition, tax preparation services like Eide Bailly can provide audit, review, and other assurance services for small businesses. They typically charge hourly, but some offer fixed fees or value billing.
Types of Tax Preparers
There are four generally acknowledged types of professional tax preparers. These are enrolled agents, electronic return originators, annual filing season program participants, and certified public accountants (CPA). Each has specific requirements for getting the initial credential/designation and maintaining that status.
An enrolled agent is a tax employee who has gained licensure from the IRS by passing a qualifying exam. They are licensed to practice nationwide without restrictions and must participate in 72 hours of continuing education in three-year increments. EAs typically earn their income through working in large CPA/accounting firms, private accounting/tax preparation businesses, and preparing returns independently for a fee.
Non-credentialed preparers still need to pass an examination or meet minimum educational, experience, or training requirements set by the IRS. This group also includes seasonal tax preparers who work in tax stores and volunteers with the IRS Volunteer Income Tax Assistance Program. Non-credentialed tax preparers are often less expensive than their credentialed counterparts.
In general, you should only hire a non-credentialed tax preparer if your return is straightforward and you’re confident in their expertise. If hiring a non-credentialed tax professional, ensure they have a Preparer Tax Identification Number (PTIN). You can verify PTINs on the IRS website. If they use a software program to complete your return, ask them to see their Electronic Filing Identification Number (EFIN). This unique identifier the IRS assigns to preparers approved to use its software.
Deferred Payment Products
Deferred payment products allow customers to pay for goods or services in a way that defers payments to the merchant until after a specific amount of time. Buy now, pay later is the most well-known example of this type of product, but it is also used in agriculture to reduce cash flow stress for farmers and improve customer experience. A billing system with features built explicitly for managing deferred payments can help companies manage this payment model more efficiently and effectively.
IRS Representation Rights
If you get an audit notice or any other IRS problem, having someone represent you in front of the agency is best. Every taxpayer has the right to representation during an administrative encounter in response to an IRS notice. Generally, anyone allowed to practice before the IRS—tax attorneys, certified public accountants, and enrolled agents—is eligible to serve as your representative. However, you can also be represented by a tax preparer with your written authorization.
The types of representatives differ in their qualifications, skills, and knowledge. Those with unlimited representation rights—EAs, CPAs, and attorneys—can represent their clients in any matter before the IRS, including audits, collection, and payment/collection issues. In contrast, those with limited representation rights—PTIN holders and individuals who participate in the IRS’s Annual Filing Season Program (AFSP)—can only represent their clients in matters involving returns they prepared and signed.
While any preparer can help you with basic taxes, the education, and expertise required to defend you against an audit or other dispute makes it important to find a qualified professional. Many preparers invest time daily checking the IRS website for changes to tax laws, technical corrections, and other updates that can impact their work. Additionally, they should have a solid understanding of the rules and procedures for handling IRS disputes and appeals.
The type of fee structure a tax preparer uses will be one of the biggest factors in how much you pay for their services. Some of the more common pricing models include a per-form/schedule fee, an hourly rate, and a value-based fee.
Perform and schedule fees are often determined by the number of forms/schedules a tax return requires. For example, taxpayers may need to complete several schedules delineating their rental property income, typically involving extensive data entry and calculation. This could lead to a higher fee than someone who does not have multiple sources of rental property income.
An hourly rate is a more traditional way to determine taxes preparation fees, but it also has some drawbacks. For example, a tax professional who charges an hourly rate can quickly become expensive if they work with clients requiring substantial data entry and calculation.
Some tax professionals offer products that allow you to delay payment of their service by taking money out of your refund (a RAL, RAC, or Refund Transfer). These products are an important part of the tax preparation process, but they should be disclosed before you use them. Additionally, some tax preparation firms charge higher prices during the busiest times of the year, such as when W-2 forms are issued and just before the April tax filing deadline.