the Difference Between Non-Certified and Certified Tax Professionals

“What? Your CPA isn’t a CPA?” Many taxpayers grow up believing only CPAs prepare taxes, and people who prepare taxes are CPAs. Well, shocking news. The Internal Revenue Service doesn’t require your tax preparer to be a CPA to prepare and file tax returns!Tweet: Did you know the Internal Revenue Service doesn’t require your tax preparer to be a CPA?

In fact, the only requirement to professionally prepare taxes is that the professional apply for a Preparer Tax Identification Number (PTIN), and that’s it! However, if a tax professional is to represent the taxpayer before the IRS, whether it be requesting transcripts over the phone, in person audits or in tax court, the IRS requires the professional be “enrolled” with the IRS. Certified Public Accountants (CPA), Tax Attorneys and Enrolled Agents (EA) are the three most common designations that are entitled to enroll and represent clients.

Choose your tax professional carefully.

Types of Tax Professionals That Can Represent Clients with the IRS

CPA (Certified Public Accountant)

A CPA is a professional who met the state educational and experience requirements to practice public accounting. Not to mention, they had to pass four grueling tough exams to be certified. But of all the content tested by the exams, less than 13% covers individual taxation. The bread and butter of the CPA profession is really verifying that financial information published by publicly traded companies is accurate.

Tax Attorney

Often titled with the suffix of Esq (Esquire) or LLM (Master of Laws or an advanced law degree), a tax attorney is an attorney who specializes in taxation and often focuses on representing taxpayers in audits or tax court. Of all the enrolled professionals, only Tax Attorneys have the right of client-attorney privilege, and thus, anyone facing criminal charges should work with a Tax Attorney. While many states recognize client-accountant privileges, it still may be possible to subpoena the accountant’s records and notes to be used as evidence.

EA (Enrolled Agent)

a rare breed. Chances are you have never heard of Enrolled Agents or understood their role until recently. After passing three rigorous exams testing on all tax topics ranging from estate taxation to preparer ethics and business tax planning, the IRS awards a professional with the Enrolled Agent designation – one of the few IRS administered certifications. In the world of taxes, an Enrolled Agent can prepare any return and represent any client that a CPA or Tax Attorney can. Enrolled Agents can also represent their clients in tax court.

Types of Tax Professionals Who Can Only Prepare Taxes

RTRP (Registered Tax Return Professional)

RTRPs are tax preparers who have successfully passed the IRS’ RTRP exam. While not enrolled nor as well studied as Enrolled Agents, the RTRPs have achieved a basic understanding of taxation. The IRS has pushed several times to require all tax preparers to either be enrolled or pass the RTRP exam as a minimum standard to prepare taxes, however, this has been overruled in court.

MBA (Master's in Business Administration)

Those with an MBA are very familiar with business principles and have had to take basic and advanced courses in accounting and finance as part of their coursework. While general business acumen is helpful, it’s not a guarantee of tax competency.

MST (Master’s of Science in Taxation) or MAcc (Master’s of Accounting)

These programs are similar to MBA programs but with a much stronger emphasis in taxation and accounting.

Some states do enforce minimum tax preparer standards. For example, in California, tax preparers who are not enrolled with the IRS must meet annual California Tax Return Preparer (CRTP or CTEC) requirements. New York enforces similar standards.

While everyone wants a highly qualified tax preparer, higher quality comes at a higher price. It’s not unheard of for Tax Attorneys or CPAs to charge $1,000-$5,000 for a tax return that a RTRP might only charge $300 for. But price and credentials aren’t everything. CPAs are certainly not created equal. Always take into account reviews and ask the right questions before making the switch to another tax preparer.

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