Taxpayers will run into an alphabet soup when they go to their tax preparer this spring. Tax credentials validate a preparer’s experience and expertise. Find out which ones your tax preparer has and check them out. Having credentials typically requires passing exams, abiding to a code of ethics and taking a minimum amount of continuing education (CPE) every year.
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.
Enrolled agents, certified public accountants and attorneys have unlimited representation rights before the IRS and may represent their clients on any matters including audits, payment/collection issues, and appeals.
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.
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 stateand 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.
IRS Annual Filing Season Program – Record of Completion Holders – The Annual Filing Season Program (AFSP) is intended to recognize and encourage the voluntary efforts of unenrolled tax return preparers to increase their knowledge and improve their filing season competency through continuing education. AFSP – Record of Completion Holders must meet annual educational requirements set by the IRS and either take and pass an annual tax refresher course or have passed other IRS recognized state or national competency tests such as Accredited Business Accountant and Accredited Tax Preparer (read more on ACAT credentials below.) Annual Filing Season Program participants have limited representation rights, meaning they can represent clients whose returns they prepared and signed, but only before revenue agents, customer service representatives, and similar IRS employees, including the Taxpayer Advocate Service.