Understanding Tax Return Professional Credentials and Qualifications

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More than 78 million people who pay taxes utilize the services of tax professionals to prepare their tax returns. Generally, any tax professional who has an IRS Preparer Tax Identification Number (PTIN) is authorized to prepare federal tax returns.

Most tax professionals provide top-notch services, but they have varying levels of expertise, skills, and educational background. One major difference that sets them apart is their “representation right”, also known as practitioner rights. These rights include their ability to represent their clients before the Internal Revenue Service (IRS).

These rights fall into two categories, unlimited representation and limited representation. The unlimited representation rights, as the name says, allow tax practitioners to represent their clients in any matter: audits, bookkeeping, related payment or collection issues, and appeals, to name a few.

On the other hand, limited representation rights only allow the professional to represent their clients whose returns are prepared and signed by them and only before revenue agents, representatives of customer service, and IRS employees like the Taxpayer Advocate Service.

Comprehensive Guide to Credentials and Qualifications

Unlimited Representation Rights

Certified Public Accountants (CPAs), Enrolled agents (EAs), and attorneys have unlimited representation rights before the IRS.

Certified Public Accountants

Certified Public Accountants (CPAs) complete the Uniform CPA Examination. Moreover, they have studied a bachelor’s degree with at least 150 hours of formal education and gained experience under a licensed CPA.

They must adhere to the ethical and good character requirements set by their board and complete continuing professional education to maintain their professional competence and, most importantly, their CPA license.

They may provide a variety of services, for example: audit, consultancy, forensic, and specialized tax planning and preparation.

Enrolled Agents

Enrolled Agents (EAs) are licensed by the IRS. They must pass a three-part comprehensive enrollment exam which tests their proficiency in federal tax planning, representation, and tax return preparation of both individuals and businesses.

They are also subject to suitability checks and must complete 72 hours of continuing education every three years.

Attorneys 

Attorneys are licensed by state courts. They have completed a degree in law and also passed a bar exam. They have on-going continuous education and standards of professional character.

Though attorneys are able to offer a wide range of services, some specialize in tax planning and preparation.

Limited Representation Rights

Tax practitioners with limited representation rights include Annual Filing Season Program Participants and PTIN Holders.

Annual Filing Season Program Participants 

Annual Filing Season Program Participants is a voluntary program which recognizes the efforts of the individuals preparing tax returns who are not CPAs, EAs, or attorneys. This program was particularly designed to encourage education and make taxpayers ready for filing season.

The Annual Filing Season Program Record of Completion is issued by the IRS to return preparers who complete a specific number of continuing education hours in preparation for a given tax year.

PTIN Holders 

Preparers of tax returns with a Preparer Tax Identification Number (PTIN), but no professional credentials and non-participants of the Annual Filing Season Program, are also allowed to prepare tax returns.

However, this is the only authority that PTIN holders have. They cannot represent clients before the IRS (this rule does not apply to returns they prepared and filed on or before December 31, 2015).

Directory of Federal Tax Return Professionals with Credentials and Select Qualifications

The IRS has a searchable and sortable public directory which contains certain tax professionals in order to help taxpayers determine the credentials and qualifications of their tax preparer.

The database contains the name, state, city, and zip code of tax practitioners with both limited and unlimited representation rights.

Reminder

All of the above-mentioned practitioners and individuals must have an IRS issued PTIN to be eligible to lawfully prepare your tax returns. Furthermore, the IRS suggests checking the history and qualifications of their tax preparers and seting the terms before starting an arrangement to ensure that no discrepancies occur in your filing process.

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