Many people in the US find it is challenging to prepare taxes themselves because of the complexity of the US tax code and the regulations that change every year. Therefore, tax preparation service is a service that will likely never go out of style.
For those who want to become a tax preparer, they might encounter two of the most common questions such as “How to become a tax preparer?” and “What are tax preparer requirements in the US?”. So, the complete guide here will give you everything you need to know to become a tax preparer. Keep reading!
What Does A Tax Preparer Do?
A tax preparer or tax practitioner is a person who is in charge of preparing, filing, and assisting general tax forms for clients and submitting them to the Internal Revenue Service (IRS). They must support their clients in terms of complying with the state and federal tax codes. Besides, based on their understanding of tax law and the result of calculating a return, they can provide essential advice about taking the tax burden off clients’ shoulders and defending their clients with the IRS.
A tax preparer can work full-time, part-time, or as an independent contractor at financial companies, accounting firms, or private companies.
In addition to tax preparation, they can provide clients with accounting, bookkeeping, and payroll services
There are two types of tax preparers, including credentialed tax preparers and non-credentialed tax preparers.
- A credentialed tax preparer is a person who receives credentials from a state, a government, or the Internal Revenue Service (IRS). They are primarily responsible for accounting and tax-related tasks. Three types of credentialed tax preparers are Certified Public Accounts (tax CPA), Enrolled Agents (EAs), and Tax Attorneys.
- A non-credentialed tax preparer is a person who prepares taxes without a credential from a third party. They may be self-taught or attend training where they work.
See more: What Is Financial Planning?
What Are Tax Preparer Requirements in the United States?
Working as a non-credentialed tax preparer is quite a straightforward process, as most companies do not require candidates to have credentials, certifications, or degrees. Although they are not required for this field, tax preparers must pursue qualifications and degrees to increase their salary and job security.
Education
Minimum degree requirements often vary by employer. Many companies require tax preparers to have at least a high school diploma or equivalent, and they tend to prefer candidates who have taken accounting or tax preparation courses. Some financial companies looking for qualified tax preparers may require candidates to have a bachelor’s degree in accounting or business.
Certifications
As a credentialed tax preparer, you must obtain IRS taxes license called PTIN (Preparer Tax Identification Number) from the IRS. Besides, if you want to be eligible for more advanced tax preparation jobs in the future, you should be certified as CPA (certified public accountant) or EA (enrolled agent).
Moreover, to be certified as a credentialed tax preparer, you can be a member of one of several professional associations, such as:
- American Institute of Certified Public Accountants
- National Association of Tax Professionals
- National Association of Enrolled Agents
- Institute of Management Accountants
- National Society of Accountants
An example of AICPA certification
Training
A tax preparer taking courses or webinars to learn tax preparation, accounting, and tax laws will be a huge plus for employers.
You can consider organizations that offer the following training courses:
- The Accreditation Council for Accountancy and Taxation (ACAT)
- The National Association of Tax Professionals (NATP)
Skills
Some common soft skills for every tax preparer:
- Attention to detail
- Critical thinking
- Excellent verbal and written communication
- Customer service
- Analytical thinking
Some common technical skills for tax preparers:
- Data entry skills
- Knowledge of taxes and tax laws
- Familiarity with programs like QuickBooks and Microsoft Excel
See more: What Is Financial Reporting?
6 Steps To Become A Tax Preparer
Step 1: Complete entry-level education
Most tax preparers should have at least a high school diploma or pass the General Educational Development (GED) certificate to meet the basic tax preparer requirements. This process might take about four years to complete.
Besides, you can participate in internships and extracurricular programs before working in any company. These programs can open many doors to entry-level positions after graduation and teach you how these tax procedures work in the real world.
Step 2: Take tax preparation courses
Completing college courses or even a bachelor’s degree program helps you gain knowledge in the finance industry in general, tax preparation, and tax laws, regulations, and ethics in particular. Consider enrolling in accounting or taxation courses at a local or online technical college or vocational school to get familiarity with tax rules and documents. It might take 3–4 years to finish this.
Although bachelor’s degrees are seldom required by businesses, having one can give you advantages over your competitors in this industry
Those who want to become skilled and qualified tax preparers may attend training programs from The Accreditation Council for Accountancy and Taxation (ACAT) or The National Association of Tax Professionals (NATP). These types of programs often run for about ten weeks. Courses may cover subjects such as:
- Taxpayer filing status
- Taxpayer interviews
- State tax codes
- Calculation of refunds
- Annual filings
- Tax forms, and so on.
Step 3: Apply for your PTIN
All tax preparers require a Preparer Tax Identification Number (PTIN) to file taxes with the IRS. If there are any issues or problems with the taxpayers, the IRS can immediately identify the tax preparer using this number, which identifies the taxpayer. It does not require any license to obtain a preparer tax identification number (PTIN) from the IRS. However, tax preparers must pass a suitability test and renew their registration yearly.
An image of steps on how to apply for a PTIN
To apply for a PTIN, tax preparers can visit The IRS website at https://www.irs.gov/tax-professionals/ptin-requirements-for-tax-return-preparers, create an account, complete the application by submitting their social security number, and personal data and tax return from the previous year to the IRS.
- Non-credentialed tax preparers are restricted to filing only a few different kinds of tax returns. They are not permitted to represent their clients before the IRS above the level of a basic audit.
- Credential tax preparers can file returns for and represent all taxpayers. They not only must pass some tests about knowledge of taxes but also must pass a compliance check on their tax history.
Each state will have its own licensing and registration requirements for tax preparers. While some states need that tax preparer to have a current PTIN, others also demand education, certification, and testing.
If you want to file tax returns electronically, the IRS requires that you have an Electronic Filing Identification Number (EFIN). It may take about 45 days to get your EFIN.
Step 4: Obtain a taxes license in your state
As mentioned above, each state will have its specific registration requirements. Therefore, some states might need you to obtain a state license, a required beginner course, or pass a state exam to become a tax preparer. Some states require taxes license with the state’s tax agency in the US:
- California,
- Connecticut
- Maryland
- Nevada
- New York
- Oregon
Step 5: Earning CPA or EA certification
To be eligible for your advanced tax preparation career, being certified as a CPA or an EA is essential. Even though each state requires specific needs, you still need to have a certain amount of coursework hours or college credits and years of work experience to take the exam.
Enrolled Agents (EA)
They must pass the three-part examination on tax regulations and ethics and have in-depth experience in accounting, tax law, finance, or a related field. Also, to keep their taxes license valid, they must complete 72 hours of continuing education yearly.
Certified Public Accountants (CPA)
Becoming a CPA requires a bachelor’s degree with at least 120 credit hours. To keep their license valid, they must adapt continuing education requirements to their state and maintain membership at AICPA.
Step 6: Work as a tax preparer
When starting a tax preparation career, most tax preparers choose to work in tax preparation chain locations, accounting firms, or tax attorney offices. They will not only be able to learn knowledge from their experienced co-workers but also could learn more about state requirements where they plan to start their career.
See more: What Is Bookkeeping? 2023 Best Practices By Accounting Experts
Most Common Misconceptions About Working as A Tax Preparer
The following is a list of common misconceptions about working as a tax preparer.
The software does all the work
It’s understandable that software does help the tax calculating process quite quickly and accurately. Although you are not going to jail just because of some errors on your tax returns, you have to correct them, and the process might take time if you have little experience in this field.
All tax preparers are the same
Many people assume that anyone can do taxes. However, tax preparers differ in many ways, including costs, timeliness, and experience. Although the calculation of deductions, credits, and exemptions is the same, the tax results can vary significantly based on the tax preparer’s experience. Ensure you can find trusted tax preparers who can advise you and ensure you take advantage of significant tax savings.
Tax preparation is seasonal
One more misconception about tax preparers is that many think they only work during tax season. Tax preparers can work year-round, and their busy work is during tax season.
Tax preparers work for the IRS
The biggest misconception about tax preparers may be that people think they work for the IRS and wonder why they have to pay to file for taxes. While the IRS can conduct tax preparation for you, it may not be in taxpayers’ best interest. You might not have noticed that tax laws change quickly, often after every tax season. Therefore, you need someone who keeps up with the changing tax codes and guidelines to ensure you remain compliant and help you save on tax.
Not getting audited means the preparer is doing a good job
Your tax preparer may be doing a good job if you have not been audited for a long time. However, it may be a misconception. The IRS may take up to three years to audit taxpayers based on their previous returns.
Fees for preparing taxes are too high
This claim is not valid because it depends on the company or an independent contractor tax preparer you use. Look over their qualifications, certifications, degrees, and experience, and ensure you get an affordable price.
See more: What Are Accounts Payable? 2023 Guide By Accounting Experts
Frequently Asked Questions
How long does it take to become a tax preparer?
Tax preparers can have a PTIN before completing any tax education. This process might take a little time. However, if you want to be a professional tax preparer, you should complete a tax preparation course, which often takes several weeks and more time afterward to pass any exams required for state registration.
How does one become a work-from-home tax preparer?
To become a work-from-home tax preparer, you need to:
- Have a preparer tax identification number (PTIN)
- Have skills and qualifications (you should have a background in tax preparation or accounting)
- Have hands-on experience (having experience as a bookkeeper, tax preparer, or accountant is always helpful)
- Register tax preparation business (each state has specific requirements, and most of them require you to register your business. Visit here and start the registration online)
We hope this complete guide gives you detailed information on How to become a tax preparer in the US. Working with a professional tax preparer can help you quickly handle your taxes, eliminate errors, and ensure significant tax savings.
Are you looking for tax preparation services? We offer Outsourced Tax Preparation services with skilled and qualified tax preparers. Contact us here for further discussion. Our dedicated consultants are willing to answer all of your questions.
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