In the tax preparation world there are EAs (Enrolled Agents), tax preparers (PTIN holders), and tax preparers who have an IRS record of completion (Annual Filing Season Program Participants). Then you have other professionals who qualify in the eyes of the IRS to prepare taxes as a service. There are Public Accountants, CPAs (Certified Public Accountants), and Attorneys.
All of these people can prepare taxes. But they are not the same. As a taxpayer, you have a lot of options! Here is a rundown of the differences.
There are tax preparers and then professionals who offer tax services in addition to services they specialize in. Tax preparers specialize in exactly that: preparing taxes. In order to become a tax preparer, you need to know tax law. Tax preparers are not exactly regulated. You need to make sure that the tax preparer that you choose is competent and attained the proper amount of education.
Tax preparers fall into three basic categories in the eyes of the IRS: Enrolled Agents (EAs), Annual Filing Season Program Participants, and PTIN holders.
An EA holds the highest credential there is in the tax world. They are the only tax professionals licensed by the IRS. Enrolled Agents must pass a three-part exam to demonstrate proficiency in federal tax planning, individual and business tax return preparation, and representation. They must also complete 72 hours of continuing education every 3 years.
EAs have unlimited representation rights. This means that they can represent any taxpayer before the IRS regardless of whether or not they prepared that person’s tax return.
Annual Filing Season Program Participants
Annual Filing Season Program Participants are tax preparers who have elected to go through the IRS Annual Filing Season Program (AFSP). The program consists of a 6-hour Annual Federal Tax Refresher (AFTR) course with a comprehension 3-hour test, plus 12 additional hours of continuing education annually. While this program is voluntary, it is a method through, which the tax preparer demonstrates competency by completing required education and testing. Upon successful completion of the Annual Filing Season Program the IRS awards a Record of Completion to eligible participants.
AFSP participants have limited representation rights. They may only 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.
These are tax preparers who have secured a PTIN (Preparer Tax Identification Number) through the IRS. They do not have professional credentials nor do they have representation rights before the IRS. The requirements for obtaining a PTIN are that they register their name, business name, and contact information and pay a $50 fee.
Professionals who offer tax services
Many CPAs and Attorneys offer tax services to their clients as an additional revenue stream. While most of these professionals have at least some knowledge of our tax laws, a significant portion of them may not specialize in tax return preparation. They also are not required to go through the EA exam or the IRS AFSP in order to offer tax preparation services. Individual and small business income tax preparation requires specialized education beyond what is needed to become a CPA or an attorney.
It’s likely that the Public Accountant you know took accounting in college, but in order to perform accounting duties, run QuickBooks, or any other accounting tasks, they do not have to have a college degree, license, or take any exams. They do, however, have to register with the IRS and obtain a PTIN in order to prepare taxes for compensation.
Certified Public Accountant (CPA)
It’s just like it sounds, CPAs are certified. They must earn an accounting degree from an accredited college or university, pass a CPA Exam, a Professional Ethics Exam, and complete 1,800 work hours under a CPA. If they want to prepare taxes for compensation, they must apply for a PTIN with the IRS. CPAs with PTINs have unlimited representation rights before the IRS.
You must be licensed in order to practice law. This involves a lot of education and a bar exam. Attorneys who would like to prepare taxes for clients, need to register with the IRS and obtain a PTIN. Once they do so, they have unlimited representation rights before the IRS.
When it comes to choosing a tax preparer, choose wisely. You need to make sure that the person you choose has the proper education and knows the tax laws. They need to be able to ensure that you pay the least amount of taxes legally possible. They also need to be able to represent you before the IRS in the event that something happens.
Tax preparers who have been educated through schools like our sister company, The Income Tax School, have been through a significant amount of training just on tax law and tax preparation. This training goes beyond what a CPA or an Attorney goes through. Plus, the fees for tax preparation are usually lower than that of a CPA, Public Accountant or Attorney.
Here’s a quick snapshot to show you the differences between these professionals.