Who are Tax Professionals and What Does Their Designation Mean?
Types of Tax Professionals
There are three main types of professionals when dealing with IRS taxes issues and income tax preparation. These are tax attorneys, CPAs (certified public accountant), and EAâ€™s (enrolled agents).Additionally the IRS has recently added a designation of RTRP (Registered Tax Return Preparer).
Tax Attorney/Tax Relief Lawyer
Tax attorneys are lawyers who deal with the complex and technical field of tax law. A tax attorney is a good option if there is a large amount of money involved, typically $15,000 and up, and you are going to court for tax related issues or the IRS has accused you of tax fraud. Tax attorneys are best to use when dealing with complex tax law and technical tax issues.
CPA (Certified Public Accountant)
CPAs are state licensed tax professionals. CPAs deal mainly with technical accounting and auditing.
EA (Enrolled Agent)
An enrolled agent is a tax advisor and tax-preparer who is specifically licensed to practice before the IRS. On average, an enrolled agent is the most experienced professional to work with in dealing with the IRS, and they are also typically the least expensive to hire.
AFSP (Annual Filing Seasonal Preparer)
The Annual Filing Season Program is intended to recognize and encourage unenrolled tax return preparers who voluntarily increase their knowledge and improve their filing season competency through continuing education (CE).
What is an Enrolled Agent?
An enrolled agent is an individual who has earned the privilege of representing taxpayers before any office of the Internal Revenue Service. An enrolled agent can negotiate with the IRS during examinations and appeals, and act in place of a taxpayer signing consents and executing agreements on their behalf.
An enrolled agent is the only professional granted a right to practice directly from the U.S. government. Attorneys and Certified Public Accountants (CPA) have state licenses, which limits their practice only to the states where they are licensed. Unlike a CPA or attorney, an enrolled agent holds a federal license and has the right to represent any taxpayer in any state regarding federal tax matters. An enrolled agent is considered a tax specialist, which sets them apart from attorneys or CPAs who do not always specialize in taxes. The practice of enrolled agents before the IRS is not limited and they may represent taxpayers before the IRS, performing the same tasks as an attorney or CPA. The capabilities of an enrolled agent extend beyond just preparing returns to areas such as representing clients in cases involving audits, collections, and appeals.
Enrolled Agents have passed a three-part, comprehensive IRS exam covering individual and business returns. Enrolled Agents are required to take 72 hours of continuing education during the 3-year enrollment cycle, and at least 16 hours for each respective year to maintain their EA license. These 16 hours must include at least 2 hours of enrolled agent ethics or professional conduct education.
Enrolled agents, like attorneys and certified public accountants (CPAs), are unrestricted as to which taxpayers they can represent, what types of tax matters they can handle, and which IRS offices they can practice before.
What is Registered Tax Return Preparer?
Effective January 1, 2011, all paid preparers must have a Preparer Tax Identification Number before preparing returns. The Internal Revenue Service is moving into the next phase of its effort to improve the tax preparation industry by launching the new Registered Tax Return Preparer program. This new program includes registering, obtaining a Preparer Tax Identification Number (PTIN), passing a competency test and meet continuing education requirements.
The new competency test is part of a larger initiative to increase oversight of the tax preparation industry. Last year, the IRS required all paid tax return preparers to obtain a Preparer Tax Identification Number (PTIN). Those tax return preparers who currently have a valid PTIN and are required to take the new test will have until Dec. 31, 2013, to pass it.
Preparers who pass the test and meet other requirements will be given a new designation: Registered Tax Return Preparer. In order to maintain that designation, the individuals must renew their PTINs annually and complete 15 hours of continuing education each year. Enrolled Agents, Certified Public Accountants, and attorneys, among others, are exempt from the new testing and education requirements. These professional groups already meet more stringent guidelines to obtain their professional credentials.
This is another major step forward in our effort to enhance tax preparation service to millions of taxpayers. People should feel assured that the person they hire to prepare their federal tax returns has a working knowledge of the tax code, said Doug Shulman, IRS Commissioner. The majority of tax return preparers are reputable professionals but the few bad apples cause great harm to taxpayers and the industry.
Sherry Whah & Associates LLC has a combined experience of over 50 years of professionals to assist your needs.
Sherry Whah is an enrolled agent that specializes in IRS issues, as well as having over 30 years experience in the tax and accounting industry. Carol Beckstead, Julitta Dixon and Lori Wake are registered with the IRS and will be taking the IRS return preparer exam sometime in 2012.
Please, feel free to browse our website to see the services we offer as well as the many helpful resources we provide. When you are ready to learn more about what we can do for you, we encourage you to contact us.