Hiring a Tax Preparer? 4 Major Red Flags to Look Out For

Like it or not, we're slowly but surely reaching the point where it's time to start thinking about taxes. Tax returns for 2023 aren't due until April 15 this year. But the IRS recently announced that it will begin accepting tax returns as early as Jan. 29. So the sooner you file your taxes, the sooner any refund you're due is likely to hit your checking account.

When it comes to filing taxes, you have a choice. You could opt to go it alone, or you could hire professional help.

The latter is a move you should especially consider if your tax situation is complicated. It's one thing if the only income you have to report is wages listed on a W-2. But if you were self-employed in 2023, that opens up a world of possible deductions and rules to follow. So in a situation like that, getting help is something to strongly consider.

Mark Steber, Chief Tax Information Officer at Jackson Hewitt Tax Services, says, "I almost always recommend people work with a tax professional rather than risk filing a tax return by themselves. But, unfortunately, there are a lot of scammers out there because it's not a regulated market."

As such, if you're going to get tax help this year, make sure to be on the lookout for these red flags.

1. Your tax preparer doesn't have the right credentials

It doesn't take much to whip up a glossy sign that says "tax help," post it on a door, and offer up assistance to prospective clients. But Steber insists that it's important to make sure any tax professional you work with has a PTIN, or Preparer Tax Identification Number. "If they don't have any credentials that you can verify, this is something to watch out for," he insists.

2. Your tax preparer can't give you an estimate of what your filing will cost

The cost of filing a tax return for one person might differ from the cost of filing a return for a different client. And that's understandable, as there may be a different level of work involved.

But all told, Steber insists that your tax preparer should be able to give you an estimate or price for doing your taxes upfront so you know what number to budget for. "A good tax professional has set prices based on the complexity of your return," he explains.

3. Your tax preparer calculates their fee as a percentage of your refund

Some tax preparers might tell you that the amount you'll be charged for their services will be calculated as a percentage of your tax refund. This, says Steber, is the sort of arrangement you'll want to run away from. "It's just not the truth that every single tax-payer is going to get a refund, and if someone tells you otherwise, watch out," he says.

Not only can a tax preparer not guarantee you a refund, but you don't want that person to be too loose with deductions to pad your refund and score a higher fee. If the IRS audits you and you're penalized for underpaying your taxes, that fee is going to be your financial responsibility, not that of your tax preparer.

4. Your tax preparer won't sign your return

A legitimate tax preparer will sign any return they work on. If yours won't, Steber says, it's a major red flag. You shouldn't agree to work with anyone who won't take this basic step.

Getting help with your taxes could make the process of filing a return much smoother. It could also, in some cases, help you avoid an audit and potentially eke out more tax-related savings. But if you're going to hire a professional, it's important to find the right person for the job. And that means steering clear of these red flags every step of the way.