In the upcoming weeks, the World
Wide Web will be flooded with articles relating to finding the right tax
professional for your return preparation.
You will be hearing terms such as
CPA, RTRP, EA, ERO – what not beside the tax professionals’ names in
advertising. What do they all mean?
First and foremost, to prepare a
tax return, a preparer needs a PTIN (Preparer Tax Identification Number). This
is issued by the IRS to paid preparers so that they need not use the Social
Security Numbers on the prepared returns.
As of now, for acquiring a PTIN,
no training is needed. However, it is expected that by 2013, a pass in a
specially designed minimum competency test will be mandatory for preparation of
tax returns.
An RTRP (Registered Tax Return
Preparer) will also be required to spend 15 hours annually in tax related
continuous education measures. The new program will also include a mandatory
background check on tax preparation applicants so as to dig out those with a
criminal record. By 2013m, any tax preparation aspirant will need to pass the
competency test and get through the background check to acquire the PTIN.
A CPA (Certified Public
Accountant) will have an accounting degree. The accountant will have served
under a CPA for a specified period and taken up extensive tests. The state
issue the CPA certificate, and the requirements vary from state to state. They
also need to meet annual continual assessment tests in all areas of accountancy
including tax and audit.
A JD (Attorney) is a law school
graduate, having passed the state bar exam for practicing law in that
state. They need to have continuing
education in all areas of law including taxation.
A preparer, by working for the
IRS or taking comprehensive tests in all areas relating to tax qualifies to be
an EA (Enrolled Agent). Their continuing education requirement will
specifically pertain to taxation for 3 years spread over 72 hours, and can
practice in any state.
An ERO is an Electronic Return
Originator who can electronically file tax returns. For taxpayers who have
prepared their own return or for tax preparers who do not offer e-filing, this
is applicable. In case the ERO is also a qualified CPA / RTRP / JD / EA, they
can prepare the return too apart from filing it.
So, from the above listed
specialists, whom do you need?
If you need to just e-file your
return, all you need is the ERO.
If you are looking for a
preparer, here are a few pointers to keep in mind:
Ø
Who is recommended? | Check on the IRS certification
Ø
Check out the fee charged | pre-determine how
much you can spend
Ø
Ensure accessibility of preparer | what does the
preparer have to say?
Ø
List down your other specific requirements
If you mark the
3rd party designee box on the return, in case issues arise with the
IRS, a general preparer can help you on accounting & audit issues. An EA,
CPA or JD can represent you on any issue thrown up by the IRS.
These are the
major tax preparation options available. Choose what suits you best, good luck
with your taxes!
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