In today's fast-paced world, many of us do not have the time, or the inclination for that matter, to prepare our own income tax returns. However, having someone else, be it a CPA, enrolled agent or tax preparer, does not absolve us of our responsibilities. We are the ones who are held responsible in the end by the IRS if our tax returns are audited, not our preparers. Therefore, choosing a tax preparer should not be a hit-and-run decision. Tax paperwork is such an annoyance to so many people that they are content to hire the first person they come across who is willing, although not necessarily qualified, to take the job. Procrastination also causes problems when people wait until the deadline is near and are forced to accept any preparer who ha the time to fit them in. There may be a very good reason why these preparers have so much time on their hands so close to the tax deadline!
The first thing we need to know in preparing to select a tax preparer is the types of preparers available to us.
There are three types of people who prepare returns professionally.
Certified Public Accountants (CPAs)
A CPA is licensed by a state agency and is required to maintain their knowledge base through continuing education. CPA's can often provide useful financial planning advice in addition to tax preparation. CPAs are authorized to represent taxpayers at IRS hearings and audits. On average, this group is the most expensive of the three.
An enrolled agent is certified by the IRS and many are former employees of the agency. They are also authorized to represent individuals during hearings and audits. Enrolled agents also have to maintain continuing education requirements.
Tax preparers may be financial planners, retired accountants or someone who prepares returns on a part-time basis. They have no licensing or education requirements other than those imposed by the establishment they are employed by. Generally speaking, tax preparers are less expensive than the other two groups.
Tax preparers can range from certified experts with credentials who are knowledgeable in new tax changes through continued education to an unlicensed, unqualified person with a pencil and calculator trying to make a little extra money to pay off holiday debts. Unfortunately, tax preparers are not required to be licensed, certified or even trained. There are four key elements that help to determine how you should choose a tax preparer.
Tips For Choosing a Tax Preparer