Who Prepares US Tax Returns

A Certified Public Accountant (CPA) is registered with a State Board of Accountancy and has passed a national two and half day test. They can represent clients before the IRS. Generally, CPAs have 40 hours of continuing education a year. As a group, CPAs are experienced in applying tax law or accounting standards to real life situations due to their breadth of experience, advising both individuals and business. Additionally, CPAs are knowledgeable about the wide variety and complexity of tax issues facing American citizens and businesses.

An Enrolled Agent (EA) is “enrolled” to represent the taxpayer before the IRS and have taken an IRS administrated exam. They are currently required to have 30 hours of continuing education per year and primarily prepare individual returns. Frequently EA’s supplements their tax preparation services by also offering bookkeeping service, insurance services or financial planning services. As a rule, EA’s are knowledgeable on the most common issues facing individuals.

An Unenrolled Paid Preparer is any preparer that is paid to prepare a 1040 but has no national accreditation. Most “storefront” or “retail chain” tax preparation services primarily use these individuals. The chains generally have an in-house course and test that they administrated. One retail chain guarantees the “mathematical accuracy” of the return. These are typically individuals who are between jobs or those looking for supplemental income such as retirees who enjoy preparing tax returns. Unenrolled Paid Preparers are best for routine tax situations.

Off the shelf Tax Software is used by most Self-Prepared tax returns. The software tries to understand your financial history through questions and answers. Computer software is great for crunching numbers but they rely on the user’s understanding of questions for professional judgment and thus cannot ensure a proficient result.

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