OVERVIEW
Accountants that specialize in the laws, rules, and regulations for the preparation and calculation of federal, state, and local taxes are typically known as tax accountants. Tax accountants provide a range of tax-related services to both individuals and businesses, which can include preparing and filing tax returns.
Tax accountant professionals
Most accountants work for businesses, ensuring the accuracy of financial records, preparing reports on the company’s profits and losses, and comparing budgeting costs to actual business costs to help management with decision making.
Depending on the size of the company, an accountant may specialize in a certain area, such as employee compensation, data processing, health care benefits, or tax preparation. Accountants specializing in tax preparation are typically known as tax accountants.
Educational background and requirements
A tax accountant’s education can vary widely, depending on the position the person holds. While not required, most tax accountants have a bachelor’s degree. For example, a person who works full time as a tax accountant at an accounting firm normally needs at least a bachelor’s degree in accounting.
Many full-time tax accountants are certified public accountants (CPAs), or tax CPAs. To become a CPA, a candidate must:
- Pass the the Uniform Certified Public Accountant Examination, a four-part test given by the American Institute of Certified Public Accountants (AICPA).
- Meet work experience requirements and be licensed by the state(s) they practice in.
- Take additional state-required courses beyond what's needed for a bachelor's degree. Many CPAs use this additional coursework to obtain a master’s degree in accounting.
Some tax accountants who are not CPAs become what is known as an enrolled agent (EA). This credential allows the tax accountant to represent a client in any tax matter before the IRS. To become an EA, tax accountants must:
- Pass the IRS’s Special Enrollment Examination. The exam covers the preparation of individual and business tax returns as well as how to represent a client before the IRS.
- Complete at least 16 hours of new tax courses per year and 72 hours of classes every three-year period to remain an EA.
What does a tax accountant do?
The main responsibilities of a tax accountant are:
- Preparing federal and state income taxes
- Calculating and filing property taxes, sales taxes, and licenses
- Filing quarterly employment taxes
- Preparing and filing 1099 forms
- Updating management on projected taxes
- Assisting with any tax audits or legal disputes
Tax accountants can also:
- Identify incentives and tax breaks that apply to an individual or business client’s situation.
- Prepare the various forms, schedules, and statements to file taxes.
- Organize and store all tax-related documents, such as receipts for tax-deductible expenses, in order to answer any questions that might arise after taxes have been filed.
Tax planning
Using their knowledge of the various tax codes, tax accountants can advise individuals and businesses about how to manage financial assets to minimize future tax liability.
For business clients, this can include advice on tax incentives for:
- Energy conservation,
- Capital expenditure,
- And employee benefit funding.
For individual clients, this can include advice on contributing to a:
- Retirement account,
- Health Savings Account, or
- A 529 plan to pay for a child’s education.
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