Professional accountants are well regarded for their prowess in helping with tax matters, but dedicated tax preparers also offer their services to taxpayers looking for help in preparing their annual tax returns. Knowing the difference between these two types of tax professionals is useful in deciding which one is right for you.
Accountants and taxes
Accounting professionals typically have substantial education and background in accounting. In order to become a certified public accountant, a professional must take an exam that includes a wide range of accounting skills. These include performing audits; preparing financial statements for businesses, government entities, and nonprofits; understanding corporate governance structures; and dealing with various types of business regulation, including not only taxes but also licensure and other requirements.
As a result, those CPAs that choose to specialize in tax tend to have a greater background on certain tax issues than the typical tax professional. However, many CPAs specialize in areas other than taxation, and those accountants might therefore not be as capable in handling your tax issues as someone who is not a CPA but does focus on taxes.
Tax preparers concentrate on tax matters but don't necessarily have the same broad educational background that an accountant has. The quality of tax preparers can vary widely, making it useful to consider different categories of preparers.
Enrolled agents are eligible to represent taxpayers before the IRS. To become an EA, you have to pass a three-part IRS test covering individual and business tax returns or you have to have experience as an IRS employee.
The IRS also recognizes what it calls Annual Filing Season Program Participants. These individuals typically aren't attorneys, accountants, or enrolled agents, but they have taken a certain number of continuing education hours to prepare for the tax year.
Finally, many tax preparers have no special credentials whatsoever. That doesn't mean that they aren't competent to help you with your taxes, but it does mean that you have to be careful in evaluating their performance.
You'll also want to take steps to protect yourself if you begin to suspect that the tax prepare you've chosen is disreputable. In particular, the IRS warns that those who base fees on a percentage of clients' refunds should be avoided, and checking with the Better Business Bureau is a smart move.
Which tax professional is right for you and your situation depends on your particular needs and comfort level with your taxes. For simple returns, a regular tax preparer might be sufficient, but those with more complex needs should consider more experienced professionals.
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