There are four general types of tax preparers: certified public accountants, enrolled agents, tax attorneys, and non-credentialed preparers. Here's a quick guide on the differences between them.
Certified Public Accountant (CPA)
A Certified Public Accountant, or CPA for short, is a person who is licensed by the state to offer accounting services to the public. All state boards of accountancy require an aspiring CPA to pass the Uniform Certified Public Accountant Examination, a rigorous test administered by the American Institute of Certified Public Accountants (AICPA). More than forty states also require CPA candidates to pass an ethics exam.
Once licensed, a CPA must meet state requirements for continuing education. CPAs can provide a variety of services, such as,
- Maintaining financial records,
- Examining financial statements,
- Providing auditing services, and
- Preparing tax returns.
Some CPAs specialize in tax planning and preparation. CPAs are granted unlimited representation rights by the IRS. As a result, they are allowed to represent clients on any tax matters, including,
- Tax audits,
- Payment and collection issues, and
- Appeals.
Enrolled agents
An enrolled agent (EA) is a person who is trained in federal tax matters and is licensed by the IRS. The IRS grants EAs the right to represent any kind of client—individual or business—on any tax matter before any IRS office.
To become an EA, a candidate must pass the Special Enrollment Examination by the IRS. This comprehensive test covers:
- The preparation of both individual and business tax returns.
- The representation of clients.
- Other aspects of being a tax professional.
Once licensed, EAs must continue their education. They are required to complete at least 16 hours of continuing education each year and a total of 72 hours over a three-year period.
Tax attorney
An attorney is a person who is licensed by the state to practice law. Most states require an attorney to have a law degree and pass a test administered by the state bar association (bar exam). In addition, those seeking a law license usually must meet certain character requirements. Most states require their licensed attorneys to take continuing education courses to ensure that they remain up to date on new laws and changes to existing laws.
Some attorneys also have a postgraduate law degree known as a Legum Magister or LLM. This is an optional degree for lawyers interested in pursuing advanced study in a particular area of the law, such as taxation. Tax attorneys apply their knowledge of tax law to,
- The preparation of tax returns,
- Tax planning, and
- Providing advice to clients on long-range strategies for reducing their taxes.
Like CPAs and EAs, tax attorneys have unlimited rights to represent a client before the IRS.
Non-credentialed tax preparers
A non-credentialed tax preparer is an individual who prepares taxes without any professional credentials or certifications from an external organization such as the IRS, AICPA, or a Bar Association. This often includes seasonal tax preparers that work in tax stores and IRS Volunteer Income Tax Assistance Program volunteers.
- The IRS offers a voluntary program for non-credentialed tax preparers: the Annual Filing Season Program. Those who participate complete eighteen hours of continuing education, including a six-hour refresher course in federal tax law, and receive a record of completion certificate from the IRS.
- Ten states require non-credentialed tax preparers to take tax education courses before registering as a tax preparer with the state, but in the other forty states, non-credentialed tax preparers are typically not required to have any credentials.
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