Things to know about filing your tax return

By Jerry Gaddis, EA

IRS e-file has been open for about three weeks and the service is busily processing returns. While the filing season started slower than normal, as of Feb. 3, the IRS has already processed more than 20 million tax returns and doled out more than $13 billion in refunds. As you prepare to file, consider the following:

Guard your personal information. Identity theft is one of the fastest-growing crimes in the world and tax time is prime time for identity thieves. The information on your tax return — legal name, birth date, social security number, etc. — is exactly what the bad guys want, so be very careful about disclosing your data.

Definitely keep data security in mind when you see one of those omnipresent offers for free tax preparation. Ask yourself why that credit website, big box retailer or local non-profit is working for free. Who are these people and what are they doing with your data? What security procedures do they have in place? Is it worth saving a few bucks to put your data at risk?

When paying for tax preparation services ask questions as well. Verify credentials and find someone who has the skills and experience that best match your current situation. Don’t make assumptions about the guy behind the tax desk because the industry is not regulated. The only requirement to become a paid tax preparer is to purchase a PTIN — Preparer Tax Identification Number — for a nominal fee.

Currently there are about 675,000 active PTIN holders and while roughly half have professional credentials, the other half do not. It doesn’t necessarily mean these folks don’t know what they’re doing, but they have not demonstrated any tax competency to federal or state regulators. They have not passed a background check, and they are not bound by any ethical or continuing education requirements. Things are not always as they appear.

The tax credentials to look for are Enrolled Agent (EA), Certified Public Accountant (CPA) and Attorney.

The Enrolled Agent credential is the most expensive license granted to a tax professional by the Treasury Department. To become an Enrolled Agent, one must pass a comprehensive three-part exam that covers individual tax returns, business tax returns and representation before the IRS. EA’s must have a PTIN, pass a tax compliance check and complete a minimum of 72 hours of continuing education every three years. EA’s generally have unlimited representation rights before the IRS and you can find one here:

Certified Public Accountants and attorneys may also prepare income tax returns if they have a PTIN. They are licensed by their individual state boards and adhere to those standards and practices. Their specialized training and continuing education may or may not be in the field of taxation; many specialize in tax but others do not.

IRS also has an Annual Filing Season Program (AFSP). The AFSP, as the name indicates, is good for one year only. A tax preparer can participate in this program by purchasing a PTIN, taking 18 hours of continuing education and passing a 100-question quiz. While even IRS won’t call this a credential, it does recognize the efforts of uncredentialed preparers to at least stay up-to-date on what’s going on in tax world.

You can check out your tax preparer using IRS’s Directory of Federal Tax Return Preparers with Credentials and Select Qualifications:

Finally here are four signs you may need a new tax preparer:

If your situation doesn’t change much from year-to-year, your refund or balance due shouldn’t, either. Beware of a new preparer who generates a refund that sounds too good to be true.

While you are ultimately responsible for what’s on your tax return, paid preparers are required to sign the return as well. Anyone unwilling to sign his name on his work isn’t to be trusted.

Legitimate preparers are available year-round. If your preparer’s “office” is completely portable and he’s using unsecured free public wi-fi, you (and your personal information) could be in trouble.

Finally, paid preparers are not to accept any part of tax your refund. Under no circumstances should all or part of it be directly deposited into a preparer’s bank account. If someone offers this service, run screaming from the room.

To stay up-to-date on these and other changes follow up us Twitter — @TropicalTax. We are proud to be recognized by Forbes magazine as one of the 100 must-follow tax twitter feeds for 2017.

Jerry Gaddis is Founder & CEO of Tropical Tax Solutions, a full service firm headquartered in Key Largo offering Tax Consultation, Preparation and Representation services. Mr. Gaddis, a Dave Ramsey Endorsed Local Provider, is Enrolled to Practice Before the Internal Revenue Service and a Fellow in the National Tax Practice Institute. He earned degrees from the University of Florida and the Crummer Graduate School of Business at Rollins College in Winter Park, FL. He’s been in the tax business since 2004 and you can reach him at