Anyone who prepares income taxes for a fee can be considered a professional tax preparer, but not all professional tax preparers can represent you before the IRS on tax matters. Only Federally Authorized Tax Practitioners (FATPs) are granted that privilege by the IRS. This article describes the three main types of FATPs: CPAs, EAs, and tax attorneys.
The federal tax filing deadline for individuals has been extended to May 17, 2021. Quarterly estimated tax payments are still due on April 15, 2021. For additional questions and the latest information on the tax deadline change, visit our “IRS Announced Federal Tax Filing and Payment Deadline Extension” blog post.
For information on the third coronavirus relief package, please visit our “American Rescue Plan: What Does it Mean for You and a Third Stimulus Check” blog post.
A tax professional is a person with the knowledge, credentials, and hands-on experience to assist you with your tax preparation. A tax professional stays up to date on tax laws, rules, and regulations, which can change every year and have a big impact on how much you owe or get back in your tax refund. Tax professionals can be authorized by the IRS to represent you on tax and payment matters. Such professionals are known as a Federally Authorized Tax Practitioners (FATPs).
Kinds of FATPs
There are three main types of FATPs recognized by the IRS related to tax return preparation:
- Certified Public Accountants (CPAs)
- Enrolled Agents (EAs)
- Tax attorneys
Certified Public Accountants (CPAs)
CPAs are accountants who have passed the American Institute of Certified Public Accountants’ Uniform Certified Public Accountant Examination, met certain minimum work requirements under another licensed CPA, and are licensed by the state that they practice in. Many states require that CPAs also have additional classes that often lead to a master’s degree. CPAs can prepare tax returns and represent their clients before the IRS on all tax matters. They are specially trained to prepare both business and individual tax returns, so they are experts at identifying ways to save clients money at tax time. They also provide advice for reducing tax liabilities on future returns by taking advantage of IRS programs such as Health Savings Plans, college and school tuition savings accounts, and retirement accounts.
Enrolled Agents (EAs)
EAs are tax professionals who have passed the Special Enrollment Examination given by the IRS. Passing the exam qualifies EAs to represent both individuals and businesses before the IRS on any tax matter. EAs can prepare and sign tax returns and offer advice on how to reduce future tax liability. Many former IRS employees become EAs and have worked with tax returns for many years.
Tax attorneys are individuals licensed to practice law who specialize in tax matters. They are especially helpful if you have a dispute with the IRS and are looking to have it resolved in court. Tax attorneys are experts at handling audits and appeals and in negotiating with the IRS over payment and collection issues especially when you need to go to court. Tax attorneys can also help clients evaluate and minimize their tax liability and manage their assets by drawing up the appropriate legal documents.
Not all tax preparers are Federally Authorized Tax Practitioners (FATPs). Non-credentialed tax preparers, those who are not attorneys, CPAs, or EAs, often do not meet the IRS requirements for representing clients before the IRS.
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