When seeking assistance with your taxes, it’s crucial to understand the different types of tax professionals and their qualifications. The IRS mandates that anyone preparing tax returns for compensation must have an IRS-issued Preparer Tax Identification Number (PTIN), which must be entered on your return. This ensures a basic level of accountability. Beyond the PTIN, various credentials signify different levels of expertise and representation rights.
Here’s a breakdown of key tax professional designations:
Professionals with Unlimited Representation Rights Before the IRS
These professionals have the broadest authority to represent clients on any tax matters, including audits, payment/collection issues, and appeals.
- Enrolled Agents (EA)
- Licensing Body: Licensed by the IRS.
- Expertise: Specifically trained in federal tax planning, preparation, and representation. They hold the most expansive license the IRS grants for tax practitioners.
- Requirements: Must pass a suitability check and a rigorous three-part exam (Special Enrollment Examination – SEE).
- Continuing Education: Required to complete 72 hours of continuing education every three years, with a minimum of 16 hours annually (including 2 hours on ethics).
- Certified Public Accountants (CPA)
- Licensing Body: Licensed by state boards of accountancy.
- Expertise: Possess a broad range of accounting services, including tax preparation and planning, financial reporting, and auditing. Some CPAs specialize specifically in tax.
- Requirements: Must meet education (typically 150 semester hours), experience, and “good character” requirements set by their state boards. They must pass the Uniform CPA Exam.
- Continuing Education: Must comply with ethical requirements and complete continuing education to maintain an active license. Specific CPE requirements vary by state, but commonly involve 80 hours every two years or 120 hours every three years, often with an ethics component. For example, California requires 80 hours every 2 years, while New York requires 40 hours annually.
- Attorneys
- Licensing Body: Licensed by state courts or their designees (e.g., state bar associations).
- Expertise: Can offer a range of legal services, and some specialize in tax preparation and planning, particularly in complex tax law or tax litigation.
- Requirements: Generally include completion of a law degree, passage of an ethics and bar exam.
- Continuing Education: Must complete ongoing continuing legal education (CLE), which often includes specific hours in tax law if they specialize in that area.
Professionals with Limited Representation Rights or No Representation Rights
- IRS Annual Filing Season Program (AFSP) – Record of Completion Holders
- Purpose: This voluntary program encourages unenrolled tax return preparers to enhance their knowledge and competency through continuing education.
- Requirements: Must meet annual educational requirements set by the IRS, which typically include 18 hours of continuing education from an IRS-approved provider. This generally includes a 6-credit hour Annual Federal Tax Refresher (AFTR) course with a knowledge-based comprehension test. Some unenrolled preparers who have passed other recognized state or national competency tests (like ACAT’s ATP or ABA exams) are exempt from the AFTR course but still need 15 hours of CE (10 Federal Tax Law, 3 Federal Tax Law Updates, and 2 Ethics).
- Representation Rights: Have limited representation rights. They can represent clients whose returns they prepared and signed, but only before revenue agents, customer service representatives, and similar IRS employees, including the Taxpayer Advocate Service.
- Public Recognition: Participants are included in a public database of return preparers on the IRS website.
- PTIN Holders Without AFSP or Other Professional Credentials
- Representation Rights: For returns prepared and signed after December 31, 2015, these individuals are not allowed to represent clients before the IRS in any capacity. Their role is solely to prepare tax returns.
ACAT Credentials (Accreditation Council for Accountancy and Taxation)
ACAT offers voluntary credentials that demonstrate expertise in taxation and business matters through rigorous exams, experience, and continuing education. Holders of ATP and ABA credentials are often exempt from the IRS Annual Tax Refresher Course and qualify for the AFSP Record of Completion.
- Accredited Tax Advisor (ATA)
- Expertise: Can handle sophisticated tax-planning issues for individuals, business entities, fiduciaries, trusts, and estates, including planning for owners of closely-held businesses, highly compensated individuals, qualified retirement plans, and estate tax planning.
- Accredited Tax Preparer (ATP)
- Expertise: Possess a thorough knowledge of the tax code and individual tax return preparation, covering comprehensive Form 1040 issues, supporting schedules, and self-employed returns.
- Accredited Business Accountant/Advisor (ABA)
- Expertise: Demonstrates thorough knowledge and proficiency in financial accounting, financial reporting, financial statement preparation, taxation, managerial accounting, business law, and ethics for small- to medium-sized businesses.
- Accredited Retirement Advisor (ARA)
- Expertise: Recognized for thorough knowledge of topics relevant to retirement planning and special issues of senior citizens, including tax planning and preparation for decedents, estates, and trusts.
State-Specific Licensing Requirements
It’s important to note that some states have their own licensing or registration requirements for tax preparers, even if they hold a federal PTIN. These often exempt CPAs, EAs, and attorneys.
- California (CTEC Registered Tax Preparer – CRTP)
- Requirement: Anyone preparing tax returns for a fee in California, who is not an exempt preparer (CA CPAs, EAs, attorneys), must register with the California Tax Education Council (CTEC).
- Requirements: Must complete initial tax education (60-hour qualifying education course), obtain a PTIN, purchase a $5,000 surety bond, and pass a live scan and background check.
- Oregon (Licensed Tax Preparers/Consultants)
- Requirement: Any person preparing personal income tax returns for a fee or representing that they do so must be licensed by the Oregon State Board of Tax Practitioners.
- Exemptions: CPAs, Public Accountants licensed by the Oregon Board of Accountancy, and members of the Oregon State Bar (for their law clients) are exempt.
- Requirements: Must pass exams administered by the Oregon tax board, and have specific education/experience (e.g., 80 hours of basic income tax law education for preparers, 1,100 hours of work experience over two of the last five years and 15 hours of CE for consultants).
- Maryland (Registration)
- Requirement: A registration issued by the Maryland State Board of Individual Tax Preparers is required to prepare Maryland individual tax returns for a fee.
- Requirements: Must be registered with the Board and pass the Board’s Competency Examination.
- Continuing Education: Required to complete at least 16 hours of CPE every two years, with at least 4 hours in Maryland State tax-related subjects (two of which can be federal or state ethics).
- New York (Registration)
- Requirement: Tax return preparers who are paid to prepare at least one New York State tax return or report must register with the state of New York.
- Exemptions: Licensed professionals (CPAs, EAs, attorneys) are generally exempt from this registration and continuing education.
- Requirements: Must register electronically and often complete free online continuing education courses through the state’s online learning system.
When choosing a tax professional, it’s always advisable to verify their credentials with the issuing authority (IRS, state board of accountancy, state bar, CTEC, Oregon Board of Tax Practitioners, Maryland State Board, New York State Tax Department) and confirm that the specific individual you are working with holds those credentials and is actively involved in preparing your return.