Where to Turn Amidst the Alphabet Soup

Washington, DC (January 3, 2007)—Internal Revenue Code sections now number from 1 through 9,833, so it’s no wonder that every year more and more taxpayers are opting out of preparing their own returns. But finding the right tax preparer can be as confusing as the suffixes that indicate their qualifications: EA, CPA, CFP and Esq. are just some of the designations found after tax preparers’ names. Regardless of who prepares the return, the taxpayer is the one legally responsible for it, so making sure your preparer knows his or her stuff is critical.

“Choosing a tax preparer can be a difficult decision and the stakes are high,” reports Frank Degen, EA, an enrolled agent from Setauket, NY. “Because my business often involves representation before the IRS, I see people who could have been spared an audit had they taken the time to find an experienced and knowledgeable tax preparer and check out his or her credentials. The old adage about an ounce of prevention being worth a pound of cure is seldom more relevant than when it comes to selecting a tax preparer.”

Enrolled agents (EA) are all about tax. These are the only federally-licensed tax professionals. In addition to preparing your return, an enrolled agent can represent any taxpayer before the IRS for audits, collections, and appeals. Since the license is granted by the U.S. Department of the Treasury, it is not state-specific and enrolled agents may practice anywhere in the country. In order to get that license, they must either pass a three-part examination or have worked for the IRS for at least five years in a position that required regular interpretation of the Tax Code and its regulations. They are subject to background checks and must fulfill continuing professional education requirements.

Certified public accountants (CPA) consult on a broad range of accounting issues, but not all of them prepare taxes. Applicants must pass a Uniform CPA Examination in order to be licensed with the board of accountancy in their state (this is a state-specific license), undergo a background check and fulfill continuing education requirements. CPAs are also able to represent all taxpayers before the IRS for audits, collections, and appeals.

Certified financial planners (CFP) specialize in integrated, year-round financial planning. While this certification prepares them to advise clients on investments and trusts, among other things, they do not specialize in taxes and their credential does not permit them to represent clients before the IRS.

Tax attorneys (Esq.) have graduated from law school and chosen to specialize in taxes. They are licensed by the state and sometimes have a Master’s (LLM) in tax law, although there is no special qualification apart from a general law degree (J.D.) required for an attorney to practice in the field of taxation. Continuing education requirements vary by jurisdiction: nine states and the District of Columbia have no continuing education requirements at all. Attorneys are generally the priciest of the group and in most cases don’t prepare taxes, but come in after the fact to represent taxpayers in trouble.

Tax preparers other than those listed above may bill themselves as “tax practitioners” or “tax experts.” Generally, these titles are not certified, licensed or regulated designations.

Once you’ve determined what kind of tax professional best meets your needs, check out the candidates’ professional affiliations. Members of the National Association of Enrolled Agents (NAEA), for example, are required to fulfill stringent continuing professional education requirements that exceed the IRS’ requirements and must adhere to a code of ethics and rules of professional behavior. It’s a good sign if a tax preparer is involved enough in his profession to take advantage of the networking and resources available through professional organizations.

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