Before someone signs your tax return: the questions and red flags that matter

Ask these before you hand over a single document

Before you let anyone file your return, ask what credentials they hold, whether they will sign the return with their preparer number, how they set their fee, who will answer your questions after the deadline, and whether they can represent you if the IRS sends a letter. Good answers to those five questions screen out most of the problems people run into. A preparer who is vague about any of them, or who promises a bigger refund than anyone else can get, is telling you something important.

We at Hockaday CPA have prepared returns for individuals and small to mid-sized businesses for more than 35 years, and a meaningful part of our work is fixing returns that someone else prepared. Most of those situations could have been avoided with a ten-minute conversation before the engagement started. This guide gives you the questions, the warning signs the IRS itself points to, and what a careful preparer will ask you. It is general information; your own situation deserves a conversation with a licensed CPA.

Credentials: who is actually allowed to do what

According to the IRS, anyone can be a paid tax return preparer as long as they have an IRS Preparer Tax Identification Number, or PTIN. That number is a registration, not a qualification. It tells you the person is known to the IRS, not that they have passed an exam or completed any particular education. Preparers range from seasonal workers with short training to CPAs, enrolled agents and tax attorneys.

The difference shows up most clearly when something goes wrong. The IRS states that only attorneys, CPAs and enrolled agents can represent taxpayers before the IRS in all matters. Other preparers who participate in the IRS Annual Filing Season Program have limited rights, covering only audits of returns they prepared and signed. If you have a business, rental property or anything that might draw questions, you want the person who prepared the return to be able to stand beside you if it is examined.

The IRS maintains a Directory of Federal Tax Return Preparers that lists people in your area who hold professional credentials recognized by the IRS. It takes a minute to check, and it is worth doing before you share your Social Security number and bank details with anyone.

The questions, in the order I would ask them

Take this list to any first meeting. A good preparer will be glad you asked, and the answers will tell you more than any advertisement.

• What credential do you hold, and can I look it up?
• Will you sign my return and enter your PTIN on it, and will I get a complete copy?
• How is your fee calculated, and what would make it change?
• Who exactly will prepare my return, and who reviews it before it is filed?
• How do I reach you in June or October if I have a question or receive a letter?
• Can you represent me before the IRS if this return is examined?
• Do you also handle my business return, bookkeeping or payroll, or will those be split across firms?
• How do you send and store my documents securely?

Red flags the IRS itself warns about

The IRS publishes its own list of warnings for choosing a preparer, and every one of them matches something I have seen in practice. It advises being wary of preparers who claim they can obtain larger refunds than others can, and avoiding preparers who base their fee on a percentage of the refund or who offer to deposit your refund into their own account. It says to never sign a blank tax form. It also warns about unethical so-called ghost preparers, who can disappear with a taxpayer's money and personal information.

Two more warnings deserve attention. The IRS suggests you consider whether the individual or firm will be around for months or years after filing, because questions about a return can come long after the season ends. And it notes that good preparers will ask to see your records and receipts. A preparer who is happy to enter whatever numbers you say, without asking where they came from, is not doing you a favor.

• Promises of a bigger refund than anyone else can get
• Fees calculated as a percentage of your refund
• An offer to route your refund through the preparer's account
• A request to sign before the return is complete
• No signature or PTIN on the finished return
• No interest in seeing receipts or supporting documents

If your current preparer already fails this test

If you recognized your own preparer in the list above, the fix is simpler than it feels. Request complete copies of the last three years of returns, including every schedule and statement, and keep them. Then have a credentialed professional review them before you file the next one. Problems such as missed depreciation, misclassified income or an unsupported deduction are far easier to address on your own schedule than in response to a notice. Our first consultation is free, and reviewing a prior return is a good use of it.

What a careful preparer will ask you

The interview runs both ways. A preparer who takes your return seriously will ask what changed this year, whether you started or sold a business, bought or sold property, married, divorced, moved states or had a child. They will ask about income that does not come with a form, such as cash or payment-app receipts, and about estimated payments you made. They will ask to see last year's return, because it reveals carryovers and patterns that matter this year.

For business owners, expect questions about how your books are kept, whether business and personal spending are separated, how you pay yourself and whether you have employees or contractors. If your records are behind, a good firm will tell you plainly and propose a way to fix them rather than guessing. If the questions stop at your W-2 and your bank account number, the preparer is not looking at your whole situation. Our guide on what a CPA needs to prepare your return lists what we typically request.

For business owners: one firm or a patchwork

If you own a company, add a question most people skip: who handles everything around the return? Many owners end up with a bookkeeper in one place, a payroll service in another, a preparer for the business return and someone else for the personal return. Each one does its part, and nobody looks at the whole. Numbers get re-entered, year-end adjustments get missed, and planning never happens because no one has the full picture in time to act.

That arrangement can work, but only if someone owns the coordination. Ask a prospective preparer whether they will review your books before preparing the business return, whether they talk to your payroll provider, and whether they look at the business and personal returns together. At our firm, tax preparation, QuickBooks bookkeeping, payroll and planning sit in one office, which is why we can often spot an issue in the books before it becomes an issue on the return. Whatever you choose, make sure one person can answer the question of how the whole year fits together.

Talking about price without getting burned

Price is a fair question, and you should ask it early. What you want to hear is how the fee is built: by the forms and schedules involved, the condition of your records, and any catch-up work. A firm that can explain that clearly is a firm that will not surprise you later. A suspiciously low flat price often means either a thin review or a bill that grows once the work starts.

Our own rates, as stated on our website, are typically below the big chains, and our first meeting is free. I explain the factors behind a fee in more detail in our guide on what drives the cost of a CPA-prepared return. The point is not to find the cheapest preparer. It is to find one whose work you will never have to pay to redo.

Matching the preparer to the return you actually have

Not every return needs a CPA, and I will say so when that is true. A household with wages, a standard deduction and nothing unusual may be well served by software or a free program; the IRS offers free basic return preparation through its Volunteer Income Tax Assistance program for qualifying taxpayers. The equation changes once a business, rental, partnership interest, stock compensation, a move between states or an IRS notice enters the picture. If you are unsure which side of the line you are on, our guide on signs a return has outgrown software walks through it.

In my experience, the best fit is a preparer who handles your kind of return regularly, not occasionally. Ask how many clients they serve with situations like yours. Someone who works with self-employed people, landlords and family businesses every week will know which questions to ask before you think to raise them.

How a first meeting with our firm works

You can call our Frisco office or use the form on our website to schedule a free consultation. We ask about your income sources, any business or rental activity and what changed this year, and we answer every question on the list above directly. Our team includes CPAs, an enrolled agent, tax accountants and bookkeepers, and our CPAs complete 40 hours of continuing education each year.

If you decide to work with us, you are assigned an accountant, you share documents through our secure client portal, and the return is reviewed before it is filed. We serve individuals and businesses across Collin County and the northern Dallas suburbs, and we are here after April, which is when many of the most useful conversations happen.

Questions people ask me