Types of Tax Return Preparers
Tax return preparation can be time-consuming, complicated, and downright exasperating. When there is other work to be done, taxes seem to never get erased from of the to-do list. In any case, filing those taxes is necessary, and the safest way to do it is hiring a professional tax preparer. Take note, even minor mistakes can be expensive and troublesome, but working with an expert helps you avoid them.
The question is, which one must you hire? There are many types of professionals out there who are more than glad to help people with their taxes. The following is a quick list of designations most common today:
Certified Financial Planner (CFP)
A CFP should pass an exam, fulfill certain educational requirements, obtain experience in finance, and meet other specific qualifications. Some CFPs know much about filing taxes, but others don’t. If you are looking at someone with this designation, research more about their experience as a tax preparer prior to hiring them.
Certified Public Accountant (CPA)
As the designation indicates, a certified public accountant is an individual who has been certified by the state to act as a public accountant. In accounting, this is the sole licensed qualification. Most individuals need to meet certain educational requirements on top of passing a series of exams, depending on the specific requirements of the state. CPA services include accounting, financial planning, business evaluation and auditing. Some CPAs are exclusive tax specialists.
Enrolled Agents (EA)
An enrolled agent is someone who has passed a three-part IRS exam or worked as a former IRS employee. EAs are required to complete ongoing education courses to remain updated on tax law changes, and must follow strict ethical standards. This is the highest IRS-awarded credential a tax preparer can have.
JD (Law Degree) and LLM (Master of Law)
Anyone who has these degrees may have a specialty in taxation, but this is not the case all the time. If you must work with any legal professional, make sure they focus their pratice on taxes and not a whole range of areas. The attorney who did a great job with your car accident or divorce may not be your best option for your taxes!
A VITA volunteer is a tax preparer who has been trained by the IRS to handle basic returns. However, if you are a business owner, this is often not the best person to approach.
Finally, If you look further, you will find that there are also many bookkeepers, accountants and unlicensed tax preparers out there who are good but do not have formal qualifications. This does not mean you have to rule them out. But you may have to look deeper into their tax preparation knowledge and experience.