Tax professionals have differing levels of skills, education and expertise. The most important difference in the types of preparers is “representation rights”.
Representation rights is whether the tax preparer has the ability to discuss your tax situation with the IRS—this includes responding to certain correspondence between you and the IRS including audits, payment/collection issues and appeals. Here is guidance on each credential:
• Enrolled Agents are licensed by the IRS and specifically trained in federal tax planning, preparation and representation. Enrolled agents hold the most expansive license IRS grants and must pass a suitability check, as well as a three-part Special Enrollment Examination, a comprehensive exam that covers individual tax, business tax and representation issues. They complete 72 hours of continuing education every 3 years.
• Certified Public Accountants are licensed by state boards of accountancy and have passed the Uniform CPA Examination that covers accounting audits, financial reporting, regulation of business law and taxation, and other financial topics.
• Attorneys are licensed by state courts or their designees, such as the state bar. Generally, requirements include completion of a degree in law, passage of a bar exam and on-going continuing education and professional character standards.
• Annual Filing Season Program – Record of Completion are preparers who met basic IRS education and filing season readiness requirements. These preparers have limited rights and may only represent clients whose returns they prepared and signed.