The IRS said 60% of taxpayers are using paid preparers. You can have anyone file your tax return, but if you’re paying, you’d best be sure that he or she is registered with the IRS and has a preparer tax identification number.
Based on their qualifications, these paid preparers fall into different categories.
Types of Tax Preparers
Attorneys
These practitioners are licensed to practice law by states or state bar associations and are subject to provisions for continuing education and an ethics code.
Attorneys are best used for high-profile tax issues, which may include litigation. It is also best to use an attorney if there are any problems that could involve criminal activity, because statements to an attorney by a client are usually confidential.
CPAs
Certified public accountants are practitioners who have completed the Uniform CPA Examination and are certified by state accountancy boards, in addition to having qualifications for continuing education.
CPAs are trained to deal with complex tax problems or special issues, such as overdue returns. They will serve clients through all forms of contact with IRS, including audits and appeals.
Enrolled Agents
EAs have completed the three-part Special Enrolment Test, demonstrating federal taxation competency.
These professionals are able to handle most tax issues, have full rights of counsel before the IRS, and are able to represent clients during IRS audits and appeals.
Annual Filing Season Program Participants
Such individuals are not attorneys, CPAs, or licensed agents but have completed an IRS program.
You can hire them to file your tax return but they have minimal rights to appear before the IRS.
Anyone with a PTIN
These are people who believe they have enough knowledge to file returns and paid the fee to get a PTIN. They are not subject to a state, professional board, or IRS scrutiny.
These individuals can be a suitable choice for easy returns that do not require any complex tax problems. A client may allow them to negotiate with the IRS, but they cannot represent a taxpayer in audits or appeals.
Storefront preparers, such as H&R Block or Liberty Tax, frequently employ a variety of tax professionals, primarily Enrolled Agents and CPAs. If you visit one, you’ll likely be assigned to an individual whose skills align with your return’s complexity.
The Cost
Fees across the country vary greatly, depending on the type of preparer and the duration of your return. In general, you can pay lawyers the highest fees, followed by CPAs, and then EAs. The lowest fees are charged by the applicants and preparers without any special designation.
Red Flags
Make sure that you are clear of anyone who might be unscrupulous or create problems for you. These include individuals who guarantee refunds, charge according to the amount of tax refund, offer to cash refund checks for you, prepare returns without asking you for the proper documentation.
If you have any questions, please check with the Better Business Bureau to find out if charges have been filed against a specific preparer. Additionally, check with the relevant state board of accountancy for issues with CPAs and state bar association for attorneys.
If you need professional help in your tax returns, our small business tax professionals can help guide you in the right direction. Contact us today at 818-452-2641 or fill out our contact form to schedule a free consultation.