Choose your tax pro?

lucyMonday I posted Really you don’t’ know what an Enrolled Agent (EA) is? I would like to point out that the client I lost was due his believed need for a CPA to sign his returns. From talking to the client, it seems it was his banker who told him that.

So let me start by saying that public perception of who is a tax preparer and who can prepare returns, who can represent you if the need arises is all screwed up. This is not helped any by the IRS and (seeing that I am sure they would blame congress for it) our Congress not changing things. But what they need to change is a whole other article.

Then again why would they? I mean you have very large business/organizations making “donations” in the right pockets to cover all this over and not change anything. The NAEA is doing what they can, but one organization against many others….
One of my friends was contacting the AICPA asking about taking a test so to stand out among other CPAs as being a tax professional. The response was noted for saying that the AICPA has no such need for anything like that. The exact response as it was quoted to me – “We do not offer a credential in taxation. In general, our approach has been not to develop credential programs around areas for which the public already believes CPAs to ‘own’. In addition, we do not endorse a particular tax credential.” 

So let me explain this as I see it. The AICPA (American Institute of CPAs®) doesn’t offer accreditation to CPAs in tax because it is of public belief that “Just because” you are a CPA you are already perceived as the Tax Professional.  


Dear taxpayers who believe that just because someone is a CPA they are tax pros,

Good luck. 

I know I go on an on and on about this, but it seems I need to. And it is truly sad that the more popular Tax Bloggers don’t. There are all kinds of designations out there that are in the tax preparation world. Here are the most popular right now.

  • Enrolled Agents
  • Registered Tax Return Preparers
  • CPAs
  • Attorneys

I am only going to over these because they are the most popular. They are in the order they are in based on a list from the IRS talking about the Overview of Tax Return Preparer Requirements. Now I have seen or heard nothing from any IRS representative as to why the order is what it is. It isn’t alphabetical that is for sure. I do however have a theory, please, take it with a grain of salt if you will as again, this is an opinion, my opinion. To me this list, the order in which EAs and RTRP are above CPAs and Attorneys has to do with who the IRS looks to first or to the most.

Enrolled Agents are two groups of people, either former IRS employees who have dealt with tax interpretation for 5 or more years or folks who have passed an extensive 3 part test. Register Tax Return Preparers are folks who have also taken a proficiency test all involving tax issues. Both the EA and the RTRP must maintain CPE in tax education, (EAs are required more than RTRP) guided by the IRS.  CPAs I feel are next in my opinion out of sequence but because Tax returns are reports of income and in business there are a lot of accounting requirements in Business returns, they are next. And don’t get me wrong, CPAs have a four part test (see below) but it isn’t over taxes. And then Lawyers. This is thrown in I think because tax returns aren’t just numbers, in fact it is “Tax Law” that we as preparers are following so it would make since to have Lawyers in this list. I would like to throw in here that the test we take, EAs and RTRP – are all tax, guided by federal level, CPAs and Attorneys have test to take also, but cover little in the way of tax (from what I understand the tax part of both these test are geared more towards Corp and Estates and Ethics).

So who should do your taxes? Who should you go to to prepare your return? It is going to depend on your situation. The most accurate answer to this question is not wrapped up in a designation, it is going to determine your needs and/or your situation. Should your situation be such that you need a CPA or a Lawyer, please, and I can not stress this enough, PLEASE make sure the one you chose is familiar with your situation. I can not stress this enough either, just because someone has one of the four above designations, does not make them right for your situation. 

Okay, lets look at these folks:
An Enrolled Agent (EA) is a tax practitioner authorized by the United States Federal government to represent tax payers in affairs with the Internal Revenue Service (IRS). The United States Department of Treasury empowers EAs to represent taxpayers for any audits, appeals or collections. This occupation is and has been regulated by Congress since 1884. It was originally established to investigate questionable and fraudulent claims that were submitted in the wake of the Civil War. Congress decided to regulate persons who were given the task of representing citizens in affairs with the United States Treasury.

The RTRP designation means that the preparer has passed a test of minimum competency to prepare tax returns.  Although the credential itself just establishes minimum competency, that does not mean that a preparer with that is only minimally qualified, but that is all the credential itself tells you.  The IRS intended to require that preparers MUST be an RTRP if they were not a CPA, EA, or attorney.  Due to a lawsuit, that requirement is currently on hold.  I personally would not hire anyone who was not at least an RTRP.

A CPA is licensed on a state level and can only practice in that state. Once they decide where they want to practice, they have to take the exam, which is a pretty standardized exam regardless of the state.

Generally speaking, there are four general areas of knowledge and testing in the CPA exam:

  1. Auditing and Attestation (AUD). This section covers knowledge of auditing procedures, generally accepted auditing standards and other standards related to attest engagements, and the skills needed to apply that knowledge.
  2. Business Environment and Concepts (BEC). This section covers knowledge of general business environment and business concepts that candidates need to know in order to understand the underlying business reasons for and accounting implications of business transactions, and the skills needed to apply that knowledge.
  3. Financial Accounting and Reporting (FAR). This section covers knowledge of generally accepted accounting principles for business enterprises, not-for-profit organizations, and governmental entities, and the skills needed to apply that knowledge.
  4. Regulation (REG). This section covers knowledge of federal taxation, ethics, professional and legal responsibilities, and business law, and the skills needed to apply that knowledge.

An Attorney can prepare tax returns.  There is nothing about becoming an attorney that means you know anything about taxes.  If you are hiring an attorney to complete your tax returns, do make sure they practice heavily in tax. If you are hiring an attorney who does not also have one of the other credentials, look for them to have an LLM in Tax.  An LLM is an advanced law degree. Tax attorneys are generally hired to prepare estate tax returns, gift tax returns, and do complex tax planning.  

So, How do you choose a tax-preparation service or preparer?

Ask the Right Questions. Once you have some choices made for your business, check them out before signing on with them. Ask for referrals, and for a (no-charge) interview, as well. 

Ask things like:

  1. What’s your experience, education, and familiarity with “new” tax laws? You need to be confident that the preparer is a well informed one.
  2. How much will you be charging me? Get at least an estimate, as you don’t want to end up unpleasantly surprised. Find out how the fee is calculated, and avoid any fee based on the size of your refund. (Fees based on your refund are not legal per the IRS)
  3. How soon will the work be completed?
  4. Who exactly will be preparing my return? Are you speaking with the preparer, or will your work be handed off to someone else in the firm? This question can give you a sense of how important your business is to the preparer. If an underling will be preparing your return, what are his or her qualifications and training? You also want to know who you will speak to if you have problems or questions down the road.
  5. Do you have continuing professional education requirements, and how much of that do you complete each year? Ideally, a candidate will be regularly keeping up with tax-law changes, and perhaps even exceeding requirements. This is especially important if your tax situation isn’t routine. (EAs are required by IRS to maintain 72 hours in a three year period. If they belong to NAEA, they must maintain 30 hours per year in continuing education, in the field of tax.)
  6. How aggressive or conservative are you? Tax returns are not always simple matters. When an issue falls in a gray area, it’s good to know how the preparer will treat it.
  7. Will I be able to contact you throughout the year? Remember that tax issues and questions can come up at any time, such as if you change jobs or marital status or are dealing with a loved one’s death.
  8. What security provisions do you have? You want to see steps taken to protect your privacy and prevent your information from going where it doesn’t belong.
  9. If I’m audited, will you represent me before the IRS? The ideal response is yes. Some preparers outsource your work, though, and may not represent you. Others may require you to be present, as well, which is not ideal. Be sure you’re OK with the answer to this question.


Be wary of any candidate making seemingly lavish claims (such as promising you a surprisingly hefty refund) or pitching his services aggressively. Never ever sign any blank forms, and make sure that the preparer includes his own tax identification number (PTIN) and signature on your return, as required on the form.

If you choose not to hire a pro to prepare your return and would rather do it yourself, consider using tax-prep software, such as Intuit’s TurboTax.

Be smart about your tax preparation, and you’ll save a lot of money — and prvent headaches.

© 2013, Bruce McFarland. All rights reserved.

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  1. Brian's Gravatar Brian
    August 17, 2013    

    Plenty of CPAs are good tax practitioners… but you’re right that serving taxpayers well requires more tax training than needed to pass the CPA exam. Accountants specializing in tax usually obtain their expertise from work experience in the field. But I often wonder why they don’t just pursue an Enrolled Agent exam study course and quickly add EA tax knowledge to their accounting skills.

  2. Name not provided's Gravatar Name not provided
    September 8, 2014    

    This is quite a read. This clears all doubts about tax services and the right tax professional for one’s business.

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