Tax professionals help individuals and businesses file taxes accurately. A tax preparer ensures businesses and individuals maximize deductions and properly submit tax forms. These professionals serve as a line of defense for audits from the IRS. Tax professionals have several different titles and each title comes with different requirements. While some tax preparers require a degree or license to practice, there are other types of tax preparers that do not need to meet any requirements.
The degree to which a tax preparer can file taxes for clients depends on their credentials. A basic requirement to become a tax preparer is the ability to obtain a Preparer Tax Identification Number (PTIN) and complete a suitability check. To electronically file taxes, preparers must obtain an Electronic Filing Identification Number (EFIN). There are four different titles tax preparers can take to become tax professionals. These titles include:
- Enrolled Agent
- Certified Public Accountant
- Tax Attorney
- Non-credentialed
While becoming a tax preparer does not require a degree, these professionals must possess excellent customer service skills. To accurately file taxes, preparers must have basic math skills, familiarity with computer programs, and knowledge of tax software.
Enrolled Agent
Enrolled agents are tax preparers who specialize in tax preparation and planning. To become an enrolled agent, tax preparers must receive a license from the IRS. Enrolled agents must pass the Special Enrollment Exam (SEE). A background check is also required to practice tax preparation as an enrolled agent. This type of preparer must enroll in 72 hours of continued education once every three years. These professionals represent clients in court when the IRS challenges tax documents and submitted information. Enrolled agents have the ability to represent clients nationwide without any state restrictions.
Another way to become an enrolled agent is to work for the IRS for five years interpreting tax codes.
Certified Public Accountant
A certified public accountant (CPA) can work individually or at an accounting firm. CPAs primarily work as accountants with the ability to file taxes. To become certified, CPAs must pass the Uniform Certified Public Accountant Exam in the state where the preparer will perform tax preparation. Each state has different requirements and the states requiring separate credentials to file taxes include:
- Illinois
- Connecticut
- Oregon
- California
- Maryland
- Nevada
- New York
To maintain their certification, CPAs must enroll in continued professional education and receive credits every year. The requirements for receiving these credits also differ by state.
Tax Attorney
Tax attorneys are the only tax preparer who requires formal education for certification and licensing. These preparers must earn a law degree and must pass the bar exam to practice. A tax attorney typically works for large corporations and helps the business file corporate taxes. Tax attorneys specialize in legal approaches to tax preparation and help clients prepare a proper defense for tax-related court issues. A tax attorney is present when clients meet with the IRS outside of court in regard to the business or financial institution taxes. These preparers are most knowledgeable about new tax laws and law changes.
Non-credentialed
Every state does not require a tax preparer to receive credentials. Current legislation does not require certification to prepare or file taxes. To prepare and file taxes, preparers need a PTIN issued by the IRS. This option works well for tax preparers who work seasonally for a major tax company. While no certification is required, it is important to display a willingness to learn the rules for preparing and submitting simple returns.
Non-credentialed prepares must study to learn proper software techniques and laws associated with filing taxes. If the preparer is receiving payment for tax services, it is important to identify all requirements and qualifications specific to the state where the taxes are prepared.
Is Tax Preparation Right For You
A simple way to enter the tax preparation field is as an Electronic Return Originator (ERO). An ERO assists current tax preparers by submitting the tax return online to the IRS. Although an ERO does not need a certification, this preparer must obtain an EFIN.
Whether you plan on receiving a certification or license to prepare taxes, there are options available to work individually or for a business. Each type of tax preparer requires hard work and a readiness to learn the rules of the trade. Enrolled Agents, CPAs, and tax attorneys all require credentials to start filing and preparing taxes.