4 Types of Tax Preparers
Who does taxes? There are several types of professionals, including CPAs, enrolled agents, tax attorneys, and non-credentialed preparers, who can help you file your tax return. Depending on the complexity of your taxes and the extent of services you might need year-round, one provider might be better than another. Learn more about the differences between them to find the right one for your needs.
Key Takeaways
- CPAs can offer a wide variety of services, including tax preparation, tax planning, and financial statement audits. CPAs can represent clients before the IRS on any federal tax matter and are often the best choice for preparing complex tax returns.
- Enrolled agents are tax professionals authorized to practice before the IRS. They focus primarily on tax preparation and planning. They’re usually less expensive than CPAs, but they can’t provide general accounting services that CPAs can handle.
- Tax attorneys can represent clients before the IRS and in court. While some attorneys prepare tax returns, they typically focus on tax litigation and providing legal advice.
- Non-credentialed tax preparers generally have no formal educational or credential requirements, but they can handle basic tax returns. They are often the most affordable option for tax preparation services and are generally suitable for straightforward tax situations.
Options if you need a tax preparer
If you’re looking for a person who does taxes, you’re likely to run across a few different types of tax preparers. For the most part, you can choose between a CPA, enrolled agent, tax attorney, or non-credentialed preparer. But which one is right for you depends on your specific needs and circumstances.
Most tax preparers have a unique set of professional requirements and standards. For example, there are different educational and training requirements for each type of credentialed tax preparer. As a result, the tasks they can handle and their level of expertise can vary widely. That can make it trickier to match your needs with a particular type of tax preparer.
To help you figure out whether a CPA, enrolled agent, tax attorney, or non-credentialed preparer is best for you, let’s take a quick look at each one of these tax preparers. We’ll also provide some tips on how to choose a tax professional that fits your needs. Hopefully, this will put you in a better position to find the right person to complete your tax return.
Certified public accountants (CPAs)
A certified public accountant, or CPA for short, is a professional accountant who has met specific education, experience, and licensing requirements for their state. They’re also held to ethical and professional standards set by their state board of accountancy.
CPAs can provide a variety of accounting services, including financial statement audits, tax preparation and planning, and consulting for businesses and individuals.
Educational and training requirements for CPAs
To earn a license, a CPA must meet their state’s education, examination, and experience requirements.
First, CPA candidates have to earn a college degree with at least 150 credit hours (which is typically hours more than a bachelor's degree requires).
They then must pass the Uniform Certified Public Accountant Examination, which is a rigorous test administered by the American Institute of Certified Public Accountants (AICPA). Most states also require CPA candidates to pass an ethics exam.
CPA candidates in most states also have to gain a certain amount of experience under the supervision of a licensed CPA. At that point, they can receive a state CPA license.
However, once licensed, a CPA still has to take continuing education classes to maintain their license.
What services can a CPA provide?
CPAs can provide a variety of services, such as:
- preparing tax returns
- tax planning
- maintaining financial records
- examining financial statements
- providing auditing services
- business consulting
They’re also allowed to represent clients before the IRS on any federal tax matter, including:
- audits
- payment and collection issues
- appeals
When a CPA might be your best choice as a tax preparer
CPAs who specialize in taxes are often the best choice for preparing your tax return, including returns for corporations, partnerships, limited liability companies, and other businesses. This is because of their high level of education and training, which also makes them even more helpful if you have a complicated tax situation.
Picking a CPA to prepare your taxes might also be a good idea if you need assistance with other financial tasks, such as accounting, auditing, or tax planning. This is especially true when it comes to assisting businesses, which might need help preparing financial statements, creating a budget, performing business valuations, and the like. Since CPAs are generally skilled in these areas, you might be able to hire just one person to provide a wide range of services, instead of having to find multiple people to fill your needs.
Their broad skill set also makes CPAs a good choice when it comes to preparing returns for gift taxes, payroll taxes, sales taxes, and other taxes beyond just income taxes.
Enrolled agents
An enrolled agent is a tax professional who is authorized to represent taxpayers before the IRS. They’re trained to handle tax preparation and other tax issues.
Like CPAs, enrolled agents must follow a set of ethical and professional standards. However, their rules and regulations are established by the IRS, not by the state or a state-level board.
Educational and training requirements for enrolled agents
While there are no educational requirements for enrolled agents – such as having a college degree – they generally have to pass the IRS’s Special Enrollment Examination before being certified by the tax agency (although certain former IRS employees don’t have to take the exam). This comprehensive test covers:
- preparation of both individual and business tax returns
- representation of clients
- other aspects of being a tax professional
Enrolled agent candidates also have to pass a “suitability check,” which includes a background check for tax compliance and criminal convictions, and obtain a Preparer Tax Identification Number (PTIN) from the IRS.
They’re also required to complete at least 16 hours of continuing education courses each year (including at least two hours of ethics training), and a total of 72 hours over a three-year period, to maintain their certification.
What services can an enrolled agent provide?
Enrolled agents generally focus solely on taxes. As a result, they tend to focus on tax preparation and tax planning.
As with CPAs, enrolled agents are also allowed to represent taxpayers before the IRS on all federal tax matters, including collections, IRS audits, and tax appeals.
When an enrolled agent might be your best choice as a tax preparer
An enrolled agent can be a great option if you need tax preparation services, especially if you have a relatively straightforward tax situation. Ditto for tax planning.
Enrolled agents can also help with other federal tax issues – such as a collection problem or a tax audit – since they can represent you before the IRS.
Also, as a rule of thumb, enrolled agents generally cost less than CPAs. So, if you want to save some money on tax preparation and your tax situation is not complicated, an enrolled agent might be a better choice.
Just remember that enrolled agents can’t do everything a CPA can do, such as compile, review, or audit financial statements. So, if you need additional services beyond tax preparation and planning, an enrolled agent might not be able to satisfy those needs.
Tax attorneys
An attorney (or lawyer) is a person who is licensed by the state to practice law. A tax attorney is an attorney who specializes in the interpretation and application of tax laws, regulations, and procedures.
Educational and training requirements for tax attorneys
Most states require an attorney to have a degree from an accredited law school. They must also pass a test administered by the state bar association (bar exam).
Some attorneys also have a master of laws (LL.M.) degree, which is obtained after law school. This is an optional degree for lawyers interested in pursuing advanced study in a particular area of the law, such as taxation.
In addition, most states require licensed attorneys to take continuing education courses to ensure that they remain up to date on new laws and changes to existing laws.
What services can a tax attorney provide?
Like CPAs and enrolled agents, many tax attorneys prepare tax returns and offer tax planning services. They also have unlimited rights to represent clients before the IRS. But you can also hire a tax attorney for other things that CPAs and enrolled agents usually don’t (or can’t) handle.
For instance, tax attorneys can represent clients in court (not just before the IRS). This includes defending clients against tax-related criminal charges. They can also draft legal documents, provide advice about gray areas of the law, and challenge the constitutionality of tax laws.
When a tax attorney might be your best choice as a tax preparer
In most cases, you’re probably better off having a CPA or enrolled agent do your taxes instead of a tax attorney. CPAs and enrolled agents typically have more tax prep experience, and their fee will likely be lower.
However, if you’re already working with a tax attorney on a tax matter, then having them prepare a related tax return (if they do that kind of work) might make sense. For instance, if you’re in court fighting the IRS on a tax matter, the attorney who handled your case might be able to file an amended return that needs to be filed once the litigation is completed.
Non-credentialed tax preparers
A non-credentialed tax preparer is a person who prepares taxes without any professional credentials or certifications from an authoritative organization, such as the IRS, AICPA, or a state bar association. This often includes seasonal tax preparers that work in tax stores and IRS Volunteer Income Tax Assistance Program (VITA) or Tax Counseling for the Elderly (TCE) volunteers.
Educational and training requirements for non-credentialed tax preparers
Generally speaking, there are no formal educational or training requirements for non-credentialed tax preparers. However, there are a number of tax preparation training courses available, including the IRS’s Annual Filing Season Program.
Companies or other organizations that bring in non-credentialed tax preparers for seasonal work may have their own standards that preparers must satisfy. For example, the IRS offers annual training for VITA and TCE volunteer preparers. They must pass a test administered by the IRS, too.
In addition, some states require non-credentialed tax preparers to take tax education courses and/or register as a tax preparer with the state.
What services can a non-credentialed tax preparer provide?
For the most part, non-credentialed tax preparers only prepare basic tax returns. They can generally answer routine tax questions, too. But it’s important to keep in mind that they’re not experts and generally don’t have the same level of expertise as credentialed tax preparers, such as CPAs, enrolled agents, and tax attorneys.
It’s important to note that non-credentialed tax preparers are not allowed to represent you in front of the IRS. This means they cannot communicate with the IRS on your behalf or handle any tax-related issues or disputes.
Tax preparers who pass the IRS’s Annual Filing Season Program can represent clients before the IRS in limited circumstances. First, they must have prepared and signed the client’s tax return. They also can only represent clients before revenue agents, customer service representatives, and similar IRS employees (including the Taxpayer Advocate Service). However, they can’t represent clients for appeals or collection issues.
Other non-credentialed tax preparers can’t represent clients before the IRS at any time.
When a non-credentialed tax preparer might be your best choice
If you're on a tight budget and have a simple tax return, you may want to consider using a non-credentialed tax preparer. They often charge lower fees than credentialed tax preparers, and some even volunteer their services through the VITA or TCE program.
If you know and trust a non-credentialed preparer – such as a family member or close friend – you also might feel more comfortable working with them, rather than handing over your financial information to a stranger with professional credentials.
However, carefully consider their qualifications and experience before choosing to work with a non-credentialed tax preparer. For more complex tax situations, it may be best to seek the help of a credentialed tax preparer who has the knowledge and expertise to handle your taxes accurately and effectively.
FAQs on how to choose a tax preparer
When you’re ready to find a tax preparer – whether it’s a CPA, enrolled agent, tax attorney, or non-credentialed preparer – you don't want to make an uninformed decision. That's why it's important to arm yourself with as much information as possible before diving in.
So, before you start your search, check out our answers to the following common questions. They should help you land a tax pro that's just right for you.
Should I hire a tax preparer near me?
You might be asking yourself: “Should I only look for tax preparers near me?”
With today’s technology, it’s possible to work with a tax professional who’s hundreds – or even thousands – of miles away. Many tax preparers will work with you online, instead of making you come to their office and meeting face-to-face. As a result, you can hire a tax preparer in any part of the country to do your taxes – and you never have to leave your home.
However, while online and remote tax preparation services have become increasingly popular, hiring a local tax expert can have its advantages, too. For example, tax preparers near you will likely be more knowledgeable about the tax laws and regulations where you live. Plus, they probably have experience working with the state and local tax agencies in your area.
Tax preparers near you will also have a better understanding of the local business environment and might be able to provide insights and advice specific to your industry or region. They might also have a network of local professionals – such as financial planners and bankers – who they can connect you with if you need additional financial services.
And, of course, if you feel more comfortable discussing your personal finances with someone sitting directly across from you, you’ll want to find a tax preparer nearby. It’s typically easier to build a personal relationship with someone you can meet face-to-face, too.
TurboTax Tip:
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Should I seek out recommendations?
If you decide to hire a local tax preparer, think about checking with friends and family members first to see if they can recommend a person who does taxes in your area. If so, ask them about the services they received, the fees paid, and their overall satisfaction with the tax preparer's work. If you like what you hear, consider moving that local tax preparer up on your list of potential candidates.
You can also ask a tax preparer that you’re considering to provide references. Just keep in mind that the references provided are likely to be favorable, since the preparer will typically choose clients who had positive experiences. So, you might not get the full picture of what it’s like to work with that preparer.
How much do tax preparers charge for tax preparation services?
The short answer is “it depends.” Tax preparation fees can vary widely based on a number of factors.
For instance, expect to pay more if you have a complicated tax return. If that’s the case, it’s going to take the tax preparer more time to complete your return, so it makes sense that it will cost you more.
Where you live can make a difference, too. If you hire a tax preparer in a big city or other urban area, you’ll likely pay more than if you have a tax pro in a rural area do your taxes.
The tax preparer’s level of expertise can also impact your fee. Someone with years of experience is generally going to charge more than someone who is just getting started in the tax prep business.
Your timing can also affect the fee you’ll pay. If you’re looking for a tax preparer in April – when income tax returns are normally due – you might end up paying more than if you line up a preparer at the beginning of tax season.
The fee can also depend on the type of tax preparer you hire. For instance, CPAs often charge more than enrolled agents and non-credentially tax preparers.
How are tax preparation fees structured?
There are a few common fee structures used in the tax prep industry:
- Flat fee. With a flat fee, the tax preparer charges a fixed amount regardless of the time spent or the complexity of the return. This is typically used for straightforward tax returns with no complex tax deductions, credits, or additional forms required.
- Hourly rate. Some tax preparers charge an hourly rate for the time spent preparing your return. This fee structure is often used for more complex returns or when it’s hard to predict the amount of time it will take to complete your return.
- Form-based fee. In this case, your fee is based on the number and type of tax forms required for your return. Some preparers will present a menu of services with different prices for each form, such as a specific fee for Schedule C, another fee for Schedule D, and so on.
- Combination fee. Some tax preparers use a combination of the above methods. For example, they might charge a flat fee for basic forms and an hourly rate for more complex tasks. This method can provide a flexible pricing structure based on the specific needs and complexities of your tax situation.
Whichever fee structure is used, always ask for a written estimate before committing to a tax preparer. This estimate should outline the fees and any circumstances that might lead to additional charges.
You also want to make sure you understand what’s included in the fee. For example, does it only cover the tax preparation, or are other services – such as audit support or tax planning – also included?
How can I check a tax preparer’s credentials?
It’s relatively easy to check the credentials of a tax preparer. Perhaps the fastest way is to search the IRS’s online directory of tax return preparers. This database lists tax preparers who hold professional credentials recognized by the IRS, such as CPAs, enrolled agents, and tax attorneys. It also includes who have completed the IRS’s Annual Filing Season Program.
There are other ways to verify a tax preparer’s credentials, too. For a CPA, contact the state board of accountancy.
You can confirm an enrolled agent’s credentials by sending an email to the IRS at epp@irs.gov. In most cases, the IRS will respond within three days. The email should include the enrolled agent’s:
- first and last name
- complete address (if available)
- enrolled agent number (if available)
To check a tax attorney’s credentials, contact the state bar association where they practice law.
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