Questions Home Sellers Should Ask a Prospective Tax Pro

Before hiring someone to advise you on tax aspects of your home sale, ask these questions.

For most people, selling their home is the largest financial transaction they’ll ever enter into during their lives. Obtaining sound tax advice can be crucial. A tax pro can help you determine whether you’ll owe any tax on the sale; and if so, how much. If you do owe tax, it’s a good idea to have a tax pro prepare your tax return for the year.

Obviously, you want to hire a knowledgeable and experienced tax pro who can capably handle your situation. Get a few names from friends and colleagues with experience in such matters. Then, before you choose which tax pro to hire, ask the following questions:

1. Do you have a PTIN (preparer tax identification number)?

Anyone who prepares tax returns for money must have a valid PTIN issued by the IRS. Don’t hire someone who doesn't have one.

2. What licenses or certifications do you have?

Tax pros are not all alike. There are four common designations, and their holders differ widely in training, experience, and fees.

  • Tax preparers: As the name implies, tax preparers prepare tax returns. The largest tax preparation firm is H & R Block, but many mom-and-pop operations open for business in storefront offices during tax time. Tax preparers are largely unlicensed and unregulated. They are generally not a good choice for tax advice or tax planning, or preparing anything other than the most simple tax returns.
  • Enrolled Agents: Enrolled agents (EAs) are tax advisers and preparers who are licensed by the IRS. They must have at least five years of experience or pass a difficult IRS test. Enrolled agents are the least expensive of the true tax pros. An experienced enrolled agent can give you good advice when you sell your home.
  • Certified Public Accountants: Certified public accountants (CPAs) are licensed and regulated by each state. They undergo lengthy training and must pass a comprehensive exam. CPAs represent the high end of the tax pro spectrum. In addition to preparing tax returns, they perform sophisticated accounting and tax work. CPAs are found in large national firms or in small local outfits. The large national firms are used primarily by large businesses. Some states also license public accountants. These are competent but are not as highly regarded as CPAs. CPAs are generally the most knowledge and expensive tax pros.
  • Tax attorneys: As the name implies, these are attorneys who specialize in tax law. Tax attorneys generally specialize in litigation with the IRS and other tax agencies. They typically don’t provide they type of tax planning and return preparation services you need when selling your home.

3. How long have you been a tax professional?

You should hire a tax pro with a least a few years of experience.

4. Have you ever been subject to any disciplinary proceedings? What was the result?

Steer clear of anyone who’s gotten into trouble. If the tax pro is a CPA, contact your state's board of accountancy to check whether any disciplinary action has been taken against him or her. If the person is an enrolled agent, you can ask the IRS Office of Professional Responsibility whether he or she has been disciplined. An Internet search for the person’s name and “disciplinary” might also turn up such information.

5. Are you familiar with the tax aspects of residential real estate transactions?

Many tax pros specialize -- for example, some prepare only business tax returns. You’re best off with a tax pro who routinely deals with residential real estate transactions. Handling residential real estate sales is a common tax issue, so you should have no difficulty finding a tax pro with plenty of experience in this area.

6. Have you prepared returns that involve residential real estate sales?

If you’re hiring a tax pro to prepare your return, make sure he or she has handled this type of return before.

7. How do you set your fee?

It’s best to pose the question of fees this way, rather than the ask “How much do you charge?” It’s impossible for a tax pro to give you an exact answer about how much the fee will be until the work is completed. Some tax pros charge by the hour; others charge a standard fee for each tax form they prepare; still others use both methods. Ask for a fee schedule.

8. What records and other documentation will you need from me?

This may include such items as your home improvement and repair records.

9. How long will it take you to prepare my tax return?

You should receive a completed copy of your return within a reasonable time, and a time that meets your schedule.

10. Will you sign my return?

Any tax pro who prepares your return for compensation is required by the IRS to sign the return. Don’t deal with any individual who refuses to do so -- it means they have something they’re trying to hide.

11. Will you help me if my return is audited or questioned by the IRS?

If the IRS audits you or sends you a letter, will the tax pro be available to help you? Will he or she represent you before the IRS? What additional fees will be charged for such help? This is important follow-up.

12. Will you provide the names of three recent clients who will serve as references?

Not all tax professionals will provide references, for reasons of client confidentiality, but if one does, it’s worth your time to follow up. Also check online resources such as Yelp for reviews.

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