Tax preparation can often be an overwhelming and confusing task. With ever-changing tax laws, understanding how to properly file your taxes may seem like a daunting challenge. But don’t despair – the help of an experienced tax preparer may be able to simplify the process for you.
In this blog post, we will explain what a tax preparer is and 6 steps to find the best tax advisor so that you can save time and maximize your financial savings.
See more: What Is Tax Accounting? Definition, Types, And Examples
What Is A Tax Preparer?
A tax preparer, also called a tax filer, is responsible for preparing, calculating, and filing income tax returns and ensuring the accuracy of various tax forms for clients (including individuals and businesses). They have specialized knowledge and help taxpayers with their income tax filing process, along with being able to provide essential advice for reducing your overall taxable burden to ensure maximum returns from your year-end filing.
What Does A Tax Preparer Do?
Tax workers can work at financial organizations or work as independent contractors. They must obtain clients’ financial information, including income statements and personal and business expenses, to calculate tax credits, deductibles, and liabilities to minimize the client’s tax burden. Moreover, they must regularly update clients’ tax information regularly, analyze past and present financial data, and communicate with clients about upcoming requirements and deadlines. Based on tax workers’ skills and knowledge, they’ll advise clients on tax management strategies to help them make smart tax-saving decisions and maximize their financial health.
Tax workers serve their clients and must have obligations and responsibilities to the IRS. They must support their clients in complying with the state tax code and regulations without breaking laws or helping clients with fraudulent tax returns.
9 Crucial Skills and Requirements You Need To Be A Tax Preparer
If you need an answer to “How to become a tax preparer?” we’ll say that becoming a tax preparer is a straightforward process. Below are some crucial skills and requirements to be a tax preparer.
To become a credentialed tax preparer, you still need to adopt some skills and requirements
Excellent Communication & Customer Service
One of the most crucial skills for tax preparers is communication and customer service. Clients are far more likely to stick with a tax preparer if they feel that the preparer can communicate with them clearly, and quickly, simultaneously comes with a friendly attitude, and adequately addresses all their questions.
According to ZipRecruiter, the 3 most important skills required to be a tax preparer are Customer Service, Communication Skills, and Technical skills.
Attention to Detail
Tax return preparation is a complex job, requiring tax preparers to deal with the challenge of completing detailed returns. So, attention to detail and accuracy when accomplishing tasks will be preferred by clients and could make you become an excellent tax preparer.
Organization
One of the most crucial proficiencies you need to have to become a professional tax worker is organization skills. Excellent organizational skills, including time management and strategic planning, allow you to utilize your resources in an efficient time and to carry out all your assigned tasks effectively.
Analytical thinking
Analytical thinking requires tax preparers to have the ability to read, analyze and interpret information to come to reasonable conclusions. Tax preparers must calculate and file customers’ income tax returns appropriately. Being able to consider a problem logically and identify the root of the problem help tax preparers understand problems and effectively develop solutions during the tax preparation process.
Math & Accounting Skills
One of the dispensable skills for tax preparers is math and accounting. You not only need thorough tax knowledge but also know how to apply calculation skills to calculate taxes correctly. In addition, tax preparers should understand how to use standard tax software as well as Microsoft Office.
Tax software is a great tool to assist tax preparers in maximizing tax deductions for clients
Continual Learning
The tax field experiences regular changes in the United States, whether in regulations, tax laws, tax codes, or software. Being proactive in staying abreast of these changes will show your clients that you are an excellent and professional tax preparer, which could make them stay with you longer.
Education and Training
Tax preparers require an educational background beyond a high school diploma or General Education Development (GED). Roles that only demand handling simple tax returns may require minimum education and on-the-job training. Roles that demand handling more sophisticated tax returns responsibilities may require tax preparers to have bachelor’s degrees in accounting, finance, or another relevant field.
However, every tax preparer must understand relevant tax laws and regulations, the tax return submission, and the confirmation process. Therefore, entry-level tax preparers might consider taking courses or training programs, which allow them to develop skills and knowledge which help them better prepare tax returns.
Tax preparer training courses are often provided by tax schools or tax preparation organizations such as The Accreditation Council for Accountancy, Taxation (ACAT) or The National Association of Tax Professionals (NATP).
These courses cover various topics for tax preparers, including filing status, various credits, deductions, foreign tax, etc.
Because every state has a different tax code, tax preparers should have in-depth knowledge of applicable procedures for filing taxes in their state and federal tax requirements. Taking these courses also helps tax preparers learn about state-specific tax information.
See more: EA Vs. CPA: Which One Is Better For Tax Professionals?
Experience
Tax preparers only require a little experience for people to enter the field. Suppose you are individuals who work in this role for one or a few tax seasons, or you have the minimum education with more than one year of experience working in customer service, administrative support, accounting, or relevant fields. In that case, you are definitely eligible.
Certification or licensure
Prospective tax preparers must meet the licensure and registration requirements of both federal and state. Besides, to become a tax preparer, you must obtain a Preparer Tax Identification Number (PTIN) before accepting payments for preparing tax returns. It’s needed to be done to meet the IRS requirements. Moreover, they must also reveal past criminal convictions or issues with their tax obligations.
To apply for a PTIN, prospective tax preparers must visit the PTIN website and follow its instruction
The licensing and registration requirements for tax preparers vary from state to state. While some states require tax preparers to have a valid PTIN, others demand education and examination.
However, preparers who are CPAs, attorneys, or enrolled agents, might be exempt from some or all of the state’s registration requirements.
2 Types of Tax Preparers
Credentialed tax preparers
There are three types of credentialed tax preparers, including enrolled agents, certified public accountants, and attorneys. With these credentials, tax experts are granted unlimited representation rights before the IRS in various situations, including appeals, payment/collection problems, and audits.
Certified Public Accountant (CPA)
The main difference between CPA vs tax preparer is education and licensure. While tax preparers have to obtain PTIN generally, Certified Public Accountants (CPAs) must have licensure issued by state boards of accountancy. They have successfully passed the Unified CPA Examination and have completed a study in accounting at a college or institution.
While CPAs can offer various accounting services, tax workers can only provide tax preparation. CPAs can offer a range of services, including:
- Maintaining financial records
- Examining financial statements
- Providing auditing services
- Preparing tax returns
- Providing tax accounting, planning, and preparation
- Dealing with appeals, payment, and collection issues
While CPAs can represent a client before the IRS, tax workers have only limited or no representation.
To keep the licensure active, CPAs must follow specific ethical requirements and complete a certain amount of continuing education every year.
Enrolled Agents
An Enrolled Agent (EA) is a person who is trained in federal tax matters and is licensed by the IRS. The IRS grants the EAs the power to represent either an individual or a business on any tax matter before the IRS.
A candidate must pass the IRS’s Special Enrollment Examination to be an enrolled agent. This test covers the following:
- The preparation of both individual and business tax returns.
- The representation of clients
- Federal tax planning
Once licensed, EAs are required to maintain their education. Each year, they must do at least 16 hours of continuing education, and every three years, they must complete 72 hours.
Tax attorneys
An attorney is a person who is licensed by the state court. Most states require lawyers to obtain a law degree and pass a test administered by the state bar association. Most tax attorneys typically receive ongoing training by taking educational courses, as required by states, to ensure they stay updated with new laws and changes to existing ones.
Attorneys may offer various services, including:
- The preparation of tax returns
- Tax planning
- Providing advice to clients to create tax preparation strategies for reducing their taxes.
See more: What Is A Tax Accountant? (Basics Explained)
Non-credentialed tax preparers
An individual who prepares taxes without professional credentials or certificates from third-party organizations such as the IRS, AICPA, or a Bar Association is a non-credentialed tax preparer. They are tax preparers or accountants who work in tax offices, volunteers who work in the Volunteer Income Tax Assistance Program implemented by the IRS, and participants who attend Annual Filing Season Program.
Because they do not have professional credentials or education, they are limited to filing only certain tax returns and have no authority to represent clients before the IRS. Besides, they can only represent clients regarding appeals or collection matters if they have prepared the returns.
In the United States, only ten states require non-credentialed tax preparers to complete tax education courses before registering as tax preparers. In comparison, in the other forty states, non-credentialed tax preparers are usually not required to have credentials or certifications.
How To Find The Best Tax Advisor?
Step 1: Make a list of potential tax preparers
Before hiring any tax preparers, you should compile a list of potential tax preparers in your area. You can also contact family, friends, and coworkers for recommendations to find more potential candidates. When everything is online now, you can try posting tax preparers’ jobs by appealing a tax preparer description on some recruitment websites such as Linkedin and Freelance.
CPAs and accountants tend to focus on a specific niche, such as small-business owners, individuals, or clients who work in specific industries. Therefore, feel free to communicate with those who have the same needs as you.
Step 2: Look for the right credentials.
When you search for tax preparers, check out their credentials, and make sure they have at least a preparer tax identification number (PTIN). A PTIN is a basic requirement for tax preparers.
If you want a qualified tax filer, who can handle complex tax returns, you should consider Certified Public Accountant (CPA), a licensed tax attorney, or an Enrolled Agent (EA). These professionals have achieved a higher level of education and expertise.
Besides you can also search the IRS’s directory. Tax filers with PTINs and IRS-recognized professionals will be included in the database, while the database will not display volunteers or tax filers with just PTINs.
Step 3: Ask about their experience and specialization
The next step on how to find the best tax preparer for you is to ask about their experience and specialization. For example, you can ask them how long they have been in the field or whether they have expertise in any particular tax matters (such as dealing with audits and the IRS) or not. It’s crucial in case you know you are about to be audited.
Step 4: Compare tax preparation fees
Some tax preparers charge based on the complexity of your return or the tax services you need. Others may charge fixed fees for every tax form required to file your tax returns.
You can also bring a copy of your latest tax returns and ask them to evaluate your situation and how much they might charge. It will help you get an overview of each tax preparer’s skills and experience to determine the most suitable for your situation.
Step 5: Reconsider tax preparers who don’t e-file
The IRS requires tax preparers who file more than 11 returns within a certain period to file those returns electronically. Therefore, if your prospective tax preparer doesn’t e-file, then we can predict that they aren’t doing as much tax preparation as you would expect
Step 6: Check if your tax preparer would have your back
If there is an audit, appeal, payment, or collection issue, ensure your tax preparer can represent you in front of the IRS. Moreover, you’ll want to ensure that they are available even if not during tax season. A right tax preparer is also a person who is willing to answer the phone or meet with you in person in case you need their assistance.
Frequently Asked Questions
What are the responsibilities of a Tax Preparer?
Below are the duties of a tax preparer:
- Calculate tax payments
- Calculate tax returns, deductibles, liabilities, and expenses
- Prepare tax reports
- Complete clients’ tax documentation
- Review data on reports and detect possible errors
- Answer clients’ financial questions
- Stay up to date with new tax trends and regulations
- Advise clients on tax strategies
- Ensure the client’s compliance with government tax rules
Who does a Tax Preparer work with?
A tax preparer usually works with clients (including individuals and business owners) and the IRS.
How much does a tax preparer usually get paid?
The average tax preparer’s salary in the United States is typically between $20 and $25. The hourly rate can vary widely depending on important factors such as education, certifications, additional skills, and years of experience.
The average tax preparer’s salary ranges from $20 to $25 per hour.
See more: How Much Does It Cost To Get Your Taxes Done? 2023 Tax Preparation
In Conclusion
We hope that the article gives you the definition of What is a tax preparer and helps you find the best tax advisor. However, always remember that you are ultimately responsible for your tax returns. That’s why make sure to check it carefully before signing anything. When something is unclear, ask your tax advisor to explain it.
Choosing a trusted tax advisor helps you take the burden off your shoulder this tax season. So, if you are looking for a trusted tax advisor, you may want to take a look at Outsourced Tax Preparation services.
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