What You Should Know About Your Tax Preparer
It may come as a surprise to many of our readers, clients, and even families, but preparing a tax return does not require any formal training or continuing education! This means that unless your tax preparer is either an Enrolled Agent, CPA, or Attorney, he or she has likely not kept up with the changes in the tax code. Anyone can hang out a shingle that says they are a tax preparer – but that doesn’t mean they know what they’re doing.
There’s just no minimum standard for who can prepare taxes!
| Category | Testing Required | Continuing Education | Practice Rights |
| Enrolled Agent | Yes | Yes | Unlimited |
| CPA | Yes | Yes | Unlimited |
| Attorney | Yes | Yes | Unlimited |
| Tax Preparer | No | No | Limited |
It Matters Who You Hire To Do Your Taxes
You would be hard pressed to know that the majority of tax preparers at the big chains are unskilled seasonal workers. There is no formal exam or minimum level of competence required to prepare taxes. The majority of these big chains provide basic tax preparer training of up to 75 hours before they are allowed to work on your taxes. The tax code is awfully complex; I’m sure we can all agree that 75 hours just doesn’t cut it. Furthermore, the seasonal nature of these large chains makes it impossible for you to reach them when you receive a notice from the IRS. That’s why a lot of the returns prepared by these chains, loaded with errors, end up in our firm.
As a consumer, you have a choice. Let’s review them.
- Enrolled Agents – While not all CPA’s specialize in taxes, the only thing EA’s focus on is taxes, many even specialize in tax resolution. In addition to IRS testing, enrolled agents must complete at least 72 hours of continuing education every three years.
Exam Requirements: The EA exam consists of 3 parts and all are related to tax.
- Individual Taxation
- Business Taxation
- Representation before the IRS
Because of their narrow focus, Enrolled Agent are your best bet when you need help with complicated tax matters or resolving your tax problems. The only exception is if you are dealing with a criminal tax matter. In this case, it is highly advisable to work with a tax attorney.
Read more about Enrolled Agents
- CPA – Certified Public Accountants are accountants who have a degree in accounting, at least two years of work experience, and have passed the CPA exam. However, it might surprise you to learn that most CPAs do not actually specialize in taxation. The vast majority of CPAs work on auditing and attesting to the accuracy of financial statements. They are the only professionals who are able to provide such assurances. Banks, investors, and the general public rely on these assurances when making business decisions. For the most part, CPAs are experts in the rules of accounting. However, knowledge of accounting does not demonstrate knowledge of tax law. Remember, the IRS doesn’t care about debits and credits; they care about the law.
Exam Requirements: The CPA consists of 4 parts
- Auditing & Attestation
- Business Environment and Concepts
- Financial Accounting
- Regulation (60% has to do with Tax)
- Attorney – Tax attorneys are highly knowledgeable when it comes to tax rules and regulations. However, the vast majority do not prepare tax returns. They usually specialize in criminal tax matters because of attorney client privilege. Enrolled Agents and CPAs only have limited privilege but not in criminal tax matters. Therefore, it is best to hire a reputable Tax Attorney for any of these situations. Tax attorneys must attend law school and obtain a J.D. degree. Of the 3 tax professionals discussed, tax attorneys are usually the most expensive.
Exam Requirements: 3-part exam commonly known as the Bar Exam.
Where You Can Find the Right Tax Professional?
Now that you know your options, the next question is how you can find the right professional. Of course, you can use Yelp, Google, Bing, etc. but did you know that the IRS began a directory for tax preparers? The IRS updates its systems regularly, usually every 30 days.
Credentials aside, you want a firm that is easy to work with and is available year round. In addition, the technology used by the firm is a key indicator of how easy it will be to work with them. At NY Tax Doctors we are constantly improving the client experience. All our services are performed in the cloud so we can easily collaborate with you on anything from Bookkeeping, Payroll, Tax Returns, and more. In addition, by working in the cloud we ensure that you have access to all your documents on the web 24/7 – Never play phone tag with your tax preparer again!