Now that tax season is upon us it is important to understand who can do tax returns and what qualifications are out there. You may be surprised to know, the IRS does not require tax return preparers to have any qualifications, in other words anyone who puts a sign on their door can say they are a tax preparer.
I want to discuss the different ways you can get your tax return prepared.
Enrolled Agents (EA) - Enrolled agents are licensed by the IRS and are the only federal licensed tax preparer. Enrolled agents are subject to a suitability check and must pass a three-part Special Enrollment Examination, which is a comprehensive exam that requires them to demonstrate proficiency in federal tax planning, individual and business tax return preparation, and representation. They must complete 72 hours of continuing education every 3 years and must comply with ethical requirements. The only thing EA's do is tax work and can practice in all 50 states. Here at David Tanner, EA Tax Service we are all Enrolled Agents.
Certified Public Accountants (CPA)– Licensed by state boards of accountancy, the District of Columbia, and U.S. territories. CPAs can practice only in the states they are licensed. Certified public accountants have passed the Uniform CPA Examination. They have completed a study in accounting at a college or university and also met experience and good character requirements established by their respective boards of accountancy. In addition, CPAs must comply with ethical requirements and complete specified levels of continuing education in order to maintain an active CPA license. Many CPAs practice in many different areas and don't do taxes on a regular basis. If using a CPA make sure they regularly prepare tax returns.
Attorneys – Licensed by state courts, the District of Columbia or their designees such as the state bar. Generally, they have earned a degree in law and passed a bar exam. Attorneys generally have on-going continuing education and professional character standards. Attorneys may offer a range of services; some attorneys specialize in tax preparation and planning.
Annual Filing Season Program Participants – This voluntary program recognizes the efforts of return preparers who are generally not attorneys, certified public accountants, or enrolled agents. It was designed to encourage education and filing season readiness. The IRS issues an Annual Filing Season Program Record of Completion to return preparers who obtain a certain number of continuing education hours in preparation for a specific tax year.
PTIN Holders - Every preparer that signs tax returns must have a PTIN number. People who have not obtain any certification, or required training just have to buy a PTIN number each year. That is the only qualifications for these preparers. They have not met any training requirements, no continuing education requirement and not bound by any ethics requirements.
Non-Signing Preparers - Some people will prepare income tax returns and then give back to the tax payer to sign. There really is no recourse for these type of preparers since they are not signing the return. Remember, the tax payer is always responsible for the tax return regardless of who prepares it.
Online preparation - plenty of these around, some more expensive than others, but they basically ask you questions and hope they are asking you the correct questions. Are they OK for someone who has one W-2 and that is it? Probably as you can't mess it up too much. The question for others is whether they ask the correct questions, or even not ask you questions they should be asking you. In the end, the few dollars you save with online preparers, do you lose more by using them through lost deductions?
Before giving your tax stuff to just anyone, find out what experience they have with your type of return. Here at David Tanner EA Tax Service, we specialize in clergy tax returns and have done more than 10,000 minister returns.
Remember, the tax payer is ALWAYS responsible for the tax return, not the preparer so pick your preparer wisely.