There are millions of “tax preparers” out there every year who prepare tax returns for Americans who need help with their taxes. However, not all tax preparers are created equal.
You may be surprised to hear that some paid tax preparers are not required to have any special license(s). Nor are they required to have any special training. In order to prepare taxes for compensation, all one needs to do is contact the IRS and get a Practitioner Tax Identification Number, or PTIN. Just about anyone can get one of these numbers, which identifies you to the IRS as a “paid tax preparer”, and lets the IRS know that you will be preparing tax returns for compensation. No special training is required. When folks who have only a PTIN and no other credential prepare a tax return, they put their PTIN by their signature, and that is that. You can get more information on PTIN holders at www.irs.gov.
Now, there are tax practitioners who are licensed and have proven their expertise in the area of taxation by taking very difficult tax-law examinations. There are three categories of tax preparers that are licensed and have proven their tax knowledge bypassing rigorous tax-law examinations, AND, they are regulated by the IRS.
An enrolled agent is a person who has earned the privilege of representing taxpayers before the Internal Revenue Service by either passing a three-part, very difficult, comprehensive IRS test covering individual and business tax returns, or through experience as a former IRS employee. Enrolled Agents are taxation specialists. Enrolled agents are licensed by the IRS, and enrolled agent status is the highest credential the IRS awards. Individuals who obtain this elite status must adhere to ethical standards and complete 72 hours of continuing education courses every three years. Enrolled Agents also must pass a rigorous, thorough background check, to ensure that when you hire one of them, you are dealing with a person of the highest integrity.
Certified Public Accountants:
CPAs are licensed by state boards of accountancy, the District of Columbia, and U.S. territories. Certified public accountants have passed the Uniform CPA Examination. They have completed a study in accounting at a college or university and have 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. CPAs may offer a range of services; some CPAs specialize in tax preparation and planning. CPAs are regulated by the States that license them, and the IRS.
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.
Any of the three credentialed tax experts mentioned above can prepare tax returns, and they have unlimited representation rights before the IRS. This means that if you need IRS representation, like in an audit situation, or if you owe the IRS a lot of money, they can represent you in any administrative matter, including Appeals.
Attorneys and certain Enrolled Agents can also represent you in Tax Court.
So, when you need tax preparation or tax advice, do not be afraid to ask your tax person about their credentials. The professionals mentioned above may charge you more to provide you with tax services, but they are generally much more qualified to assist you in these matters than someone who has not earned these credentials, nor are they regulated by any agency, as these above-mentioned professionals are.
The bottom line is…You’ll probably get what you pay for.
Randy Lewis, Enrolled Agent
Former IRS Revenue Officer