Choosing the Right Tax Expert
Everyone should have their taxes prepared by a licensed individual who has had to prove competency, and you should be well aware of exactly what credentials and rights your tax preparer holds. So let’s take a quick look at the four types of preparers/representatives you will come across.
Tax Preparer:
Basic tax preparers are not required by law to take any certification exams or demonstrate their competency in tax matters. As a result, their qualifications are often limited, and they can only assist with basic tax preparation tasks. These preparers are typically only authorized to file returns for individuals and lack the necessary credentials to represent you before the IRS in an audit unless they were directly responsible for preparing the specific return under examination. This limitation means they cannot provide the same level of expertise or advocacy that a licensed professional, such as an Enrolled Agent (EA), Certified Public Accountant (CPA), or tax attorney, would offer in more complex situations. It is important to consider these constraints when choosing a tax preparer, especially if your financial situation involves intricate tax issues or the possibility of an audit.
Key Points to Consider:
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Basic tax preparers are not required to pass any exams or prove competency in tax matters.
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They are typically only qualified to prepare individual tax returns.
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They cannot represent you in an IRS audit unless they prepared the return being audited.
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For more complex issues or audits, consider working with a licensed professional (EA, CPA, or tax attorney).
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Choose a preparer based on the complexity of your tax situation and the level of expertise you require.
Tax Attorney:
A tax attorney may or may not be qualified to prepare tax returns. Even if they are allowed to prepare returns, they are not required to pass specific tests to demonstrate their proficiency in taxation. Instead, tax attorneys are required to test solely to prove their expertise in law. While they are highly skilled in legal matters and are an excellent choice if you need representation in tax-related court cases, they may not be the best option for routine accounting, tax advice, or preparation. For tax preparation and advice, it may be more beneficial to seek out a licensed tax professional with specialized training in accounting and tax matters, such as a Certified Public Accountant (CPA) or Enrolled Agent (EA).
Key Points to Consider:
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Tax attorneys may or may not be qualified to prepare tax returns.
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They are not required to pass specific tests in taxation; their exams are focused on legal knowledge.
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Tax attorneys are an excellent choice for legal representation in court or complex legal matters related to taxes.
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For tax preparation or advice, you may want to consider a CPA or EA, who specialize in accounting and tax matters.
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Choose a tax attorney if you require legal representation, but seek an accountant for routine tax preparation or advice.
Enrolled Agents:
Enrolled Agents (EAs) are the only professionals who are required to pass a comprehensive exam and complete continuing education specifically focused on taxation. As federally licensed tax experts, EAs have unlimited practice rights before the IRS, meaning they can prepare any business (entity) or individual tax return. EAs hold a unique position as the only federally licensed tax agents, giving them the exclusive ability to represent you in any state audit, regardless of where it takes place. In contrast, attorneys and Certified Public Accountants (CPAs) are typically limited to representing clients in the state where they are licensed. With their specialized knowledge and authority, EAs are an excellent choice for tax preparation, advice, and representation, particularly in cases that involve the IRS or complex tax matters.
Key Points to Consider:
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EAs are the only professionals required to test and complete continuing education specifically focused on taxation.
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They have unlimited practice rights before the IRS and can prepare any business or individual tax return.
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EAs are the only federally licensed tax agents with the authority to represent you in any state audit.
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Attorneys and CPAs can only represent you in states where they are licensed.
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For comprehensive tax assistance, representation, and preparation, EAs are a highly qualified and specialized choice.
Certified Public Accountants:
Certified Public Accountants (CPAs) are primarily focused on accounting practices and undergo a rigorous examination that covers a broad range of topics, including some aspects of taxation. However, unlike Enrolled Agents (EAs), CPAs do not have continuing education requirements specific to taxation. Instead, their expertise is concentrated in areas such as auditing, accounting principles, and financial reporting. CPAs are fully qualified to prepare any business (entity) or individual tax return, and they can represent you before the IRS, but only in the state where they are licensed. Unlike EAs, CPAs are not authorized to represent clients in audits outside their state of licensure. For clients who require in-depth accounting knowledge or audit representation, CPAs are an excellent choice, but for more extensive tax representation across multiple states, an EA may be a better fit.
Key Points to Consider:
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CPAs are highly knowledgeable in accounting and auditing principles, with a broad exam covering various topics, including some taxation.
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CPAs do not have continuing education requirements specific to taxation.
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They can prepare any business or individual tax return and represent you before the IRS in their state of licensure.
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CPAs cannot represent you in audits outside of the state where they are licensed, unlike EAs who have unlimited representation rights.
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For accounting and auditing matters, CPAs are the most highly certified professionals, but for broader tax representation across states, an EA may be more suitable.
So, Which Do You Need?
Choosing the right tax professional depends on your specific needs, but you should generally consider an Enrolled Agent (EA), Certified Public Accountant (CPA), or tax attorney—never a basic tax preparer. While many basic preparers are competent, the lack of required competency testing means you have no way of knowing if you've found a skilled one. When it comes to having your taxes prepared, you can trust a CPA or EA to ensure accuracy and expertise. Additionally, finding a reasonable CPA or EA won't necessarily cost more just because they are licensed. In fact, at Azalea City Tax & Accounting, your taxes will be prepared by EAs or CPAs at prices that are often far more affordable than services from large chains like H&R Block or Jackson Hewitt, where you’ll mostly encounter basic tax preparers.
Key Points to Consider:
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Basic tax preparers may lack verified competency, making it difficult to know if they are qualified.
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EAs and CPAs are licensed and specially trained to handle complex tax matters and provide accurate, expert advice.
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Working with a licensed professional like an EA or CPA ensures you're in good hands when it comes to tax preparation.
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EAs and CPAs at Azalea City Tax & Accounting offer services at competitive prices, often lower than large chain services like H&R Block or Jackson Hewitt.
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Avoid basic tax preparers and choose a qualified EA, CPA, or attorney for greater peace of mind and more reliable results.
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Whether you need an enrolled agent or require a certified public accountant, our team has you covered. Contact us today for a free consultation.