Taxpayers will run into an alphabet soup when they go to their tax preparer this spring.
In addition to credentials that taxpayers might already know, such as “CPA,” many other combinations of letters can tell you a lot about the expertise of the person who prepares your tax return.
Generally, the more advanced the preparer’s credentials, the more they’ll charge to do your return, so it’s important to understand the designations to find the best preparer to fit your tax situation and your wallet.
Certified Public Accountant (CPA): This is a widely recognized credential for tax preparers and accountants. Each state has its own Board of Accountancy responsible for licensing CPAs who practice in that state, and each board issues rules that govern what a person must do to become a licensed CPA. Many CPAs specialize in accounting as opposed to tax returns, so it is important to ask about recent experience preparing tax returns and whether they are current on the latest laws in an ever-changing tax environment.
Enrolled Agent (EA): EAs have passed a three-part IRS exam covering individual and business tax returns, and must adhere to ethical standards. They must also complete 72 hours of continuing education courses every three years. Perhaps most significantly for taxpayers, EAs are authorized to represent taxpayers before the IRS.
Attorneys – People with this credential are licensed by state courts or their designees, such as the state bar. Generally, requirements include completion of a degree in law, passage of an ethics and bar exam and on-going continuing education. Attorneys can offer a range of services; some attorneys specialize in tax preparation and planning.
Other credentials and licences:
Registered Tax Return Preparers (RTRP) – Certain preparers became RTRPs under an IRS program that IRS is no longer able to enforce. RTRPs passed an IRS competency test on Form 1040 tax preparation.
Some states including CA, MD, and OR require state licensing for tax preparers.
CTEC Registered Tax Preparer (CRTP) – California law requires anyone who prepares tax returns for a fee and is not an exempt preparer to register as a tax preparer with the California Tax Education Council (CTEC). Exempt preparers are California CPAs, enrolled agents (EAs), attorneys who are members of the State Bar of California.
Oregon Licensed Tax Preparers/Consultants – Any person preparing personal income tax returns for a fee or representing that they do so must be licensed by the Oregon State Board of Tax Practitioners. The CPAs, Public Accountants licensed by the Oregon Board of Accountancy and members of the Oregon State Bar who prepare returns for their law clients are exempt from this law. Licensed tax preparers and consultants must pass exams administered by the OR tax board.
Maryland Registration – A registration issued by the Maryland State Board is required to prepare Maryland individual tax returns.
After selecting a tax preparer, make sure you know who is handling your return within the firm, because the best credentials in the world won’t help if the professional who holds them does not actually work on your return. Tax professionals must have an IRS issued Preparer Tax Identification Number (PTIN) in order to legally prepare your tax return for compensation. Make certain your preparer has one and enters it on your return.