Tax preparation may be done by the taxpayer. Some taxpayers are able to file very simple tax returns themselves. Simple returns merely acknowledge income, automatic deductions that are available, taxes that have already been deducted from payroll checks. The basic information is presented to the taxpayer to transfer to the tax form. Taxpayers also have access to tax software or online filing services, which aid them in their endeavor. Tax preparation may also be done by a licensed tax professional e.g., tax attorney, certified public accountant, an enrolled agent or, an unlicensed tax preparation business. The income tax laws in this country are thought to be quite involved – and not something you want to possibly make a mistake on. Many taxpayers will look to outside assistance with tax preparation. Many states require licensing for anyone involved in the preparation of tax returns for a fee. The requirements for licensing can vary from state-to-state. 

Paid federal tax return preparers are required, by the IRS, to be part of a national registry. Starting in 2011, new rules regarding tax preparation went into effect to protect customers from tax preparers who merely sought to collect fees without being properly responsible in the preparation of tax returns. The new tax preparation rules require that some paid tax preparers pass a national tax law exam and to keep up with the ever-evolving tax rules by undergoing continuing education requirements.

There are levels of tax preparation that separate themselves through education. As stated above, some tax preparers need to pass a tax law exam and participate in continuing education. Persons who are classified as Certified Public Accounts, Enrolled Agents or (Tax) Attorneys are required to register with all tax preparers who work for fees. However, they are not required to take the tax preparation exam and are not required to participate in continuing education. Such is the advantage of a higher education or so it seems. Certified Public Accountants and attorneys are licensed on a state-to-state basis and a majority of the States demand that they keep up to date through continuing education in order to maintain their licenses. While “personal” income tax remains somewhat uncomplicated, preparing tax returns for “profit”, “not-for-profit” and “non-profit” can be complicated. Tax preparers of all levels need to be constantly educated regarding the ever-changing nuances implemented by the IRS.

One consistency in the world of tax preparation is that all tax preparers, including attorneys, Certified Public Accountants, or Enrolled Agents are required to have a practitioner tax identification number (“PTIN”). This has been a necessary requirement for preparing Federal Tax Returns since 2011.

The IRS says that anyone can file a tax return for someone else as long as you have their permission to do so. Non-professionals are not allowed to charge a fee to “help” someone complete their return. Non-professionals are also not allowed to represent anyone should there be an issue with the tax return that was completed by them. On the other hand, any tax professional with an IRS Preparer Tax Identification Number is authorized to prepare Federal tax returns. Tax professionals with these credentials may represent their clients on any matters – including audits, payment/collection issues and appeals.

So, what does being a Registered Tax Preparer entail? Unless you are a Certified Public Accountant, Tax Attorney, or Enrolled Agent, most states want a Tax Preparer to have successfully participated in a 60-hour qualifying education course through an approved provider within the past eighteen (18) months. Tax preparers need to purchase a minimum of a $5,000.00 bond from an insurance/surety agent. The IRS will provide an Preparer Tax Identification Number (with these qualifications) and an Approved Live Scan Fingerprinting finalizes the qualifications with the IRS in most states.

To avoid penalties and interest, either file an extension by the 15th of each April – with your anticipated tax debt, or, if you are receiving a tax refund, you can file a tax return within three (3) years from the date the return was originally due to obtain your refund.

Tax Preparation – comfort comes through qualifications.