Taxpayers will run into an alphabet soup when they go to their tax preparer this spring.
In addition to credentials that taxpayers might already know, such as “CPA,” many other combinations of letters can tell you a lot about the expertise of the person who prepares your tax return.
Generally, the more advanced the preparer’s credentials, the more they’ll charge to do your return, so it’s important to understand the designations to find the best preparer to fit your tax situation and your wallet. The National Society of Accountants offers this rundown of credentials and acronyms old and new.
Certified Public Accountant (CPA): This is a widely recognized credential for tax preparers and accountants. Each state has its own Board of Accountancy responsible for licensing CPAs who practice in that state, and each board issues rules that govern what a person must do to become a licensed CPA.
Many CPAs specialize in accounting as opposed to tax returns, so it is important to ask about recent experience preparing tax returns and whether they are current on the latest laws in an ever-changing tax environment.
Enrolled Agent (EA): EAs have passed a three-part IRS exam covering individual and business tax returns, and must adhere to ethical standards. They must also complete 72 hours of continuing education courses every three years. Perhaps most significantly for taxpayers, EAs are authorized to represent taxpayers before the IRS.
After selecting a tax preparer, make sure you know who is handling your return within the firm, because the best credentials in the world won’t help if the professional who holds them doesn’t actually work on your return.
Tax return preparers and accountants can voluntarily earn credentials from the Accreditation Council for Accountancy and Taxation (ACAT) to demonstrate their expertise in taxation and business matters. Preparers must pass rigorous exams, as well as meeting experience and continuing education requirements, to earn these credentials. They include:
Accredited Tax Advisor (ATA):
These practitioners can handle sophisticated tax-planning issues, including planning for owners of closely held businesses, planning for the highly compensated, choosing qualified retirement plans, and performing estate tax planning. Their expertise covers tax returns for individuals, business entities, fiduciaries, trusts and estates, as well as tax planning, tax consulting and ethics.
Accredited Tax Preparer (ATP):
These practitioners have a thorough knowledge of the existing tax code and the preparation of individual tax returns. Their expertise covers comprehensive 1040 issues, including supporting schedules and self-employed returns, and ethics.
Accredited Retirement Advisor (ARA):
This credential recognizes professionals who have a thorough knowledge of topics relevant to retirement planning and special issues of senior citizens including tax planning and tax preparation for decedents, estates, and trusts; and applying your knowledge and skills in real-life situations when serving aging clients.
ACAT’s designation for Accreditation in Accountancy, the ABA is a prestigious professional accounting credential that demonstrates to clients, potential clients and employers that the credential holder has a thorough knowledge and proficiency in financial accounting, financial reporting, financial statement preparation, taxation, managerial accounting, business law, and ethics for small- to medium-sized businesses.
Registered Tax Return Preparer (RTRP)
Many tax preparers have already obtained the RTRP designation, which for the 2014 tax season will be required for all paid tax preparers who are not CPAs, EAs, or tax attorneys.
RTRPs have passed an IRS test establishing basic competency in preparing individual income tax returns (Form 1040s). RTRPs must adhere to ethical standards and complete 15 hours of continuing education each year from IRS-approved sources.
They have the right to prepare and sign returns and claims for refund. They may also represent clients before revenue agents, customer service representatives or similar officers and employees of the IRS (including the Taxpayer Advocate Service) during an examination if they signed the tax return or claim for refund for the tax period under examination.
Finally, the IRS now requires all paid tax preparers to have a Preparer Tax Identification Number (PTIN), so make sure your tax preparer has one and includes it on your tax return.
For more information and to identify a tax preparer in your area, visit www.nsacct.org
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NSA and its affiliates represent members who provide accounting, auditing, tax preparation, financial and estate planning, and management services to approximately 19 million individuals and business clients. Most members are sole practitioners or partners in small- to medium-size accounting firms. NSA protects the public by requiring its members to adhere to a strict code of ethics and maintain an annual continuing education regimen.