You may hear people advertising themselves as “tax preparers,” particularly in the months leading up to the April tax deadline. What does this title mean? It’s important you know the answer to that question. While many taxpayers dread tax time, having your return prepared accurately by a knowledgeable tax expert can save you both time and money--and help prevent possible IRS penalties or audits in the future. That’s why you need to understand the qualifications of the person who will be preparing your return. And it may become more confusing to decide who is the most qualified tax preparer.
The IRS developed a public online database of tax preparers who obtained a Preparer Tax Identification Number (PTIN), which is required for anyone to prepare a federal return for compensation. It's important to know that there are no minimum education or experience requirements to obtain a PTIN or be listed in the IRS database.
CPAs, however, must comply with extensive education and experience requirements. CPAs first must pass the rigorous Uniform CPA Examination in order to qualify for their licenses. This comprehensive exam tests how much CPAs know about a wide range of technical and business topics. Divided into four-parts, it has a total length of 14 hours. That’s not all that’s required to earn and maintain a CPA license, however. CPAs must also meet continuing education requirements to keep them up on new business developments. State boards of accountancy also set their own requirements governing education, ethics and work experience. All in all, the regulations ensure that only highly qualified and knowledgeable individuals are able to call themselves CPAs.
It’s important to remember that not all tax preparers are CPAs. When a CPA prepares your return, he or she uses the depth of experience and extensive knowledge that enabled him or her to pass the CPA exam in the first place and to comply with continued education and experience requirements. Your CPA also works with clients all year long, not just during tax season. CPAs spend their time outside of tax season helping clients with a wide range of issues, including future tax planning, college or retirement savings plans, or business issues. Other tax preparers may only work with clients during tax season, and may not have a big-picture understanding of the many financial issues that their clients face.
When you are choosing a tax preparer this year, remember that being a “tax preparer” does not guarantee a minimum level of education or experience. Ask specific questions about the tax preparer’s credentials, experience, education level and continued training. And keep in mind that if you work with a CPA, you can be sure that your tax professional meets rigorous testing and education requirements and has a high level of financial expertise. Equally important, a CPA has full practice rights before the IRS, which means he or she can represent you on any tax matter during any stage of the return process, including appeals.
You’ll find that your CPA can provide the advice you need on all your financial questions.