Tax season is here! If you’re wondering where to turn to get the best service for your tax return and avoid the headaches of doing it yourself, then this article will be the most important message you’ll read today.
There are many professional accounting services that can help you with your taxes, but which one should you choose? How do you know they’re right for you?
First, let’s define the different types of professional accountants: the CPA, the EA, and the Paid Preparer. We’ll take a closer look at each one:
Accountant Professional #1: The Certified Public Accountant (CPA)
A certified public accountant (CPA) is a designation given by the American Institute of Certified Public Accountants (AICPA) to individuals that pass the Uniform CPA Examination and meet the education and experience requirements. The CPA designation helps enforce professional standards in the accounting industry.
Traditionally a CPA was required to have a bachelor’s degree in business administration, finance, or accounting to be able to sit for the exam. Currently the academic requirements to sit for the CPA exam are 150 semester college credits of which 30 of those credits must be in accounting courses and 24 credits in business courses. Additionally, they must complete approximately 40 hours of continuing education each year and have no fewer than two years of public accounting experience.
CPAs often work within companies and can move into executive positions such as controllers or chief financial officers.
Accountant Professional #2: The Enrolled Agent (EA)
An enrolled agent (EA) is a tax professional authorized by the United States government to represent taxpayers in matters regarding the Internal Revenue Service (IRS). EAs must pass an examination or have sufficient experience as an IRS employee and pass a background check. They are also required to complete approximately 26 hours of continuing education each year.
Enrolled Agents advise, represent, and prepare a tax return for individuals, businesses, and any entities with tax-reporting requirements. An EA’s expertise in the ever-changing world of taxation allows them to effectively represent taxpayers audited by the IRS.
Like CPAs, Enrolled Agents have virtually unlimited practice rights before the IRS, meaning there are no restrictions to the types of tax issues they can handle and the type of taxpayers they can serve.
Enrolled agents are required to prove their proficiency in every aspect of taxes, ethics, and representation. Unlike CPAs and attorneys, the Enrolled Agent specializes in all tax matters whereas the CPAs may specialize in many different areas. An EA is typically significantly lower in cost than a CPA.
Accountant Professional #3: The Paid Preparer
A tax preparer is a professional that is qualified to calculate, file and sign income tax returns on behalf of individuals and businesses. They can also represent the taxpayer during IRS examinations of tax returns. There are various types of job titles these professionals may have, as well as various certifications and educational levels; individuals need to choose which type of tax professional will best suit their situation.
Common businesses that are paid preparers include H&R Block, Liberty Tax, and Jackson Hewitt. Paid preparers receive some training, but their knowledge and experience could be at any level. Many of them do it as a second job and for only four months out of the year. This type of professional may overlook some of the deductions you could receive when preparing your tax return.
Making Your Decision
Regarding which to choose is dependent upon the complexity of your needs and cost. However, for most individuals and small businesses, hiring an EA to address their tax preparation needs is more than adequate and cost-effective.
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