FIND A TAX PROFESSIONAL

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ACAT = ACCREDITATION COUNCIL FOR ACCOUNTANCE AND TAXATION

 

The Accreditation Council for Accountancy and Taxation is a non-profit independent testing, accrediting and monitoring organization established in 1973 by the National Society of Accountants (“the other NSA”).  It offers two credentials in taxation – the Accredited Tax Preparer (ATP) and Accredited Tax Advisor (ATA).   

 

The ATP credential identifies preparers with a thorough knowledge of the existing Tax Code and the preparation of individual tax returns, with an expertise in comprehensive 1040 issues including supporting schedules, self-employed returns, and ethics. To become an ATP you must have three years (a tax-season - January through April - is considered one year) of work experience in tax preparation, two of which may be satisfied through college credit, and pass a competency exam.  An ATP must maintain 72 hours of continuing professional education (CPE) in taxation during each three-year cycle or 24 CPE hours per year, similar to the EA.

 

The ATA credential identifies preparers who handle sophisticated tax planning issues, including planning for owners of closely held businesses, planning for the highly compensated, choosing qualified retirement plans and performing estate tax planning. Their expertise covers tax returns for individuals, business entities, fiduciaries, trusts and estates, as well as tax planning, tax consulting and ethics.  To become an ATA you must have five years (again a tax filing season = one year) of experience in tax preparation, compliance, tax planning, and consulting, of which 40% must be in tax planning and consulting, and pass a competency exam.  An ATA must maintain 90 hours of CPE during each three-year cycle, or 30 CPE hours per year.

 

Both credentials require adherence to the Council's Code of Ethics and Rules of Professional Conduct.  And both require 4 hours of CPE in “ethics” per three-year cycle.

 

The ACAT also offers credentials in accounting and retirement planning.

 

ATPs and ATAs are not authorized to “practice” before the Internal Revenue Service.  ACAT credential-holders, like any other tax preparer, can discuss processing issues relating to a Form 1040 they have prepared with the IRS as a “Third-Party Designee”, and can currently represent clients in audits of returns they have prepared under a “Power of Attorney and Declaration of Representative” (Form 2848).

 

The Internal Revenue Service Annual Filing Season Program recognizes the value of the ATP credential by exempting holders from the otherwise required annual 6-hour refresher course and comprehension testing.


In addition to the taxation credentials, ACAT also offers an Accredited Business Accountants/Advisors (ABA) accounting credential that acknowledges competence in financial accounting, financial reporting, financial statement preparation, taxation, managerial accounting, business law, and ethics for small- to medium-sized businesses via similar testing and CPE requirements.  ABA credential holders are exempt from the AFSP annual 6-hour refresher course and comprehension testing.        

 

Preparers who possess the ATP or ATA credential have demonstrated competence and currency in 1040 preparation via testing and mandatory CPE in taxation.

 

 

AFSP = ANNUAL FILING SEASON PROGRAM

 

The IRS initiated a mandatory licensure program in 2011, requiring all tax return preparers, except EAs, CPAs, attorneys, and supervised employees thereof, to become a “Registered Tax Return Preparer” (RTRP) by passing a qualifying exam and maintaining 15 hours of continuing professional education in taxation each year.  

 

In January of 2013 this program was shut down by the US District Court in Loving v IRS.  The court decision upheld the plaintiffs’ contention that the IRS did not have the authority to regulate tax return preparers.  The Service appealed the decision and lost.  It decided not to take the case to the Supreme Court, choosing instead to create a voluntary tax preparation credential.

 

The Annual Filing Season Program does not issue to participants an actual identifiable credential or initialed designation. Those who meet the program requirements will be issued a “Record of Completion” certificate and be added to “a database on IRS.gov . . . to help taxpayers determine return preparer qualifications”.

 

In order to receive a Record of Completion currently unenrolled preparers must complete 18 hours of CPE in taxes annually.  The CPE must include:

 

•   6 hours of a federal tax filing season refresher course,

•   2 hours of ethics, and

•   10 hours of other federal tax law topics.

 

The program does not require an initial competency test, but participants must pass a comprehension test upon completion of the filing season refresher course each year.

 

Preparers who had previously passed the RTRP competency exam, have passed an examination “covering federal tax matters administered by an entity recognized by the IRS as an eligible entity”, like the tests required for  the Accreditation Council for Accountancy and Taxation credentials, or have passed part 1 of the EA exam in the last 2 years, and state licensed preparers who have passed an exam covering federal tax matters,  are not be required to take the annual 6-hour refresher course (they must instead take 3 hours per year in tax “updates”) or pass the annual comprehension test to be issued a Record of Completion.


As a point of information – only ATP (Accredited Tax Preparer) credential-holders, and not those who have earned the ATA (Accredited Tax Advisor) credential, are exempt from the 6-hour update and the annual comprehension test.

 

Preparers who have received a “Record of Completion” from the IRS Annual Filing Season Program have demonstrated that they remain current in 1040 preparation via mandatory CPE in taxation.

 

 

CPA = CERTIFIED PUBLIC ACCOUNTANT

 

According to Wikepedia – “Certified Public Accountant (CPA) is the statutory title of qualified accountants in the United States who have passed the Uniform Certified Public Accountant Examination and have met additional state education and experience requirements for certification as a CPA”.

 

Merrian Webster defines a CPA as “an accountant who has met the requirements of a state law and has been granted a certificate”. And the free online dictionary says a CPA is “public accountant who has been certified by a state examining board as having met the state's legal requirements”.

 

The Investor Glossary gets more to the point – “A Certified Public Accountant (CPA) is a person licensed by a state board of accountancy to practice public accounting. The primary distinction between a Certified Public Accountant and all other accountants is that only a Certified Public Accountant can issue an opinion on audited financial statements.”

 

In order to become a CPA one must pass a difficult and lengthy exam. There are also certain education and “apprenticeship” requirements, and a CPA must earn a minimum amount of CPE credits each year to maintain his/her initials, although there is no specific requirement that any of these CPE credits be in the area of taxation. The individual education, apprenticeship and CPE requirements may vary from state to state.

 

Contrary to a popular “urban tax myth”, the CPA designation has absolutely nothing whatsoever to do with 1040 preparation.  The mere existence of the initials CPA after an individual’s name does not mean, nor should it automatically suggest, that the individual is competent or current, or even knowledgeable, in the preparation of 1040s.

 

The AICPA is well aware of this “urban tax myth” and encourages it.  The myth is also often perpetuated by uninformed print and online journalists who when writing on a 1040 topic will say “see your CPA” or “check with your CPA” or “consult a CPA” when, instead, they really should be saying “see your tax professional” or “check with your tax professional” or “consult a tax professional”.

 

See DON’T ASSUME.

 

A Certified Public Accountant has a statutory unlimited right to “practice” before the Internal Revenue Service by virtue of passing the CPA exam.  This means they are unrestricted as to which taxpayers they can represent, what types of tax matters they can handle, and before which IRS offices they can represent clients, without having to demonstrate any knowledge of tax law.    

 

Preparers who possess the CPA credential have NOT demonstrated any competence and currency in 1040 preparation via testing and mandatory CPE in taxation.

 

 

EA = ENROLLED AGENT

 

The Internal Revenue Service tells us –

 

An Enrolled Agent is a person who has earned the privilege of representing taxpayers before the Internal Revenue Service by either passing a three-part comprehensive IRS test covering individual and business tax returns, or through experience as a former IRS employee. Enrolled agent status is the highest credential the IRS awards. Individuals who obtain this elite status must adhere to ethical standards and complete 72 hours of continuing education courses every three years.”

 

The three parts of the Enrolled Agent exam – known as the Special Enrollment Examination – are

 

Part 1 - Individual

Part 2 - Business

Part 3 - Representation, Practice and Procedures

 

Required CPE includes two hours per year of “ethics”.

 

Contrary to a popular misconception, an Enrolled Agent is NOT an agent or employee of the Internal Revenue Service.  While the EA credential is administered by the IRS, an Enrolled Agent is an independent tax professional who is “enrolled” to act as a taxpayer’s “agent” in proceedings with the IRS.

 

Enrolled agents, like attorneys and Certified Public Accountants (CPAs), have unlimited right to “practice” before the IRS. This means they are unrestricted as to which taxpayers they can represent, what types of tax matters they can handle, and before which IRS offices they can represent clients.

 

Preparers who possess the EA credential have demonstrated competence and currency in 1040 preparation via testing and mandatory CPE in taxation.

 

 

JD = JURIS DOCTOR (aka ATTORNEYS)

 

While tax returns deal in numbers, the practice of tax is in reality the study and application of a specialized law (the Tax Code) and not accounting.  Just because a person can add and subtract, or is highly proficient in keeping books and preparing financial statements, does not mean he/she knows a thing about tax law.

 

An attorney has statutory unlimited right to “practice” before the IRS by virtue of passing the bar exam.  This means they are unrestricted as to which taxpayers they can represent, what types of tax matters they can handle, and before which IRS offices they can represent clients.  But just because a person has passed the Bar does not mean that he/she is proficient in the specialized field of 1040 tax law.

 

Regarding 1040 preparation and the Bar exam, I was told a few years ago by a Pennsylvania tax attorney –

 

Tax is not a subject on the MBE (which is the national multiple choice portion) but can be included on the individual state essay exam. Pennsylvania does include tax on its essay portion as a general rule (which is why most PA law schools suggest you take a tax course). There were sample tax questions on the 2009 model Q&A for PA {these involved business organization and estates and trusts and one item on taxation of scholarships – rdf}. I don't believe NJ or NY test on tax either.”

 

As there are specializations in the field of medicine there are also specializations in law - labor law, divorce law, transportation law, criminal law, corporate law, etc.  Proficiency requires additional specialized education and experience in the chosen area of practice.

 

I have a 1040 client who is a labor lawyer. He Is excellent in representing labor unions and their members in arbitration and other related areas, but is ignorant when it comes to preparing his own 1040, let alone the 1040s of his clients.

 

It has been proven time and again that there exist divorce lawyers, highly proficient in the legal aspects of the divorce process, who are totally ignorant to the tax implications of divorce.

 

As a general rule attorneys do not offer tax season preparation services to the public. A tax attorney would more likely come into play in the area of “problem resolution” and when one needs representation before the IRS after a tax issue has gone far beyond the basic audit process.

 

One should seek out a tax attorney for 1040 preparation only in extremely unique, complicated and involved situations that involve the application of extremely unique, complicated, involved and highly interpretive aspects of specific 1040 tax law, or when a taxpayer specifically requires the statutory “confidentiality” that is not available to other potential tax professionals.  

 

Preparers who possess the JD credential (i.e. attorneys) have NOT demonstrated any competence and currency in 1040 preparation via testing and mandatory CPE in taxation.

 

 

NATP = NATIONAL ASSOCIATION OF TAX PROFESSIONALS

 

The National Association of Tax Professionals is the largest membership organization dedicated 100% to tax professionals, whether “credentialed” or “unenrolled”.  It connects tax professionals with quality education, information and research. Members must follow the Association’s Standards of Professional Conduct.  

 

There are other tax preparer membership organizations – the National Society of Tax Professionals (NSTP), National Society of Accountants (NSA) for example.  I only include NATP here because this site has a link to the NATP Membership Database.

 

 

PTIN = PREPARER TAX IDENTIFICATION NUMBER

 

All individuals who want to prepare, or assist in the preparation of, federal tax returns for compensation MUST register with the Internal Revenue Service and be issued a nine-digit “Preparer Tax Identification Number” - known as a PTIN.  This number MUST be entered on all tax returns along with the signature of the preparer.

 

There are no requirements for obtaining a PTIN, other than being at least 18 years of age, possessing a valid Social Security number, and, of course, paying a fee.  In general to be issued a PTIN you cannot have been convicted of a felony and you must be currently compliant with all federal tax obligations - although there are exceptions to both situations.  There are no CPE or other requirements for maintaining one’s PTIN – other than paying an annual fee.  

 

The mere possession of a PTIN in NO WAY demonstrates any competence and currency in 1040 preparation via testing and mandatory CPE in taxation.

 

 

NO INITIALS = THE “UNENROLLED” PREPARER

 

Just because a tax preparer does not possess a credential or designation does not mean that he/she is not competent and current in 1040 preparation. 


There exist thousands of knowledgeable, experienced, competent, current, and ethical independent tax preparers who have chosen not to add initials after their names.  They belong to tax preparer membership organizations and maintain many hours of CPE in taxation each year, even though not required, to remain up-to-date on 1040 tax law.

 

In terms of 1040 preparation I believe a majority of the independent "unenrolled" practitioners are equal to ATPs, ATAs, and EAs - and also that a majority are equal to or superior in tax knowledge and experience to a great many individuals with other initials or designations. They have just decided there was no reason to get any “initials”.

 

For example, I never had any desire to represent non-client taxpayers before the IRS, so I never became an Enrolled Agent.  I also never had any desire to be able to certify financial statements, so I never became a CPA. 

 

There also exist a percentage of unenrolled practitioners who are not knowledgeable, experienced, competent, current, or ethical when it comes to preparing 1040s - just as there are individuals with initials who are not competent, current, or ethical when it comes to preparing 1040s, preparing or certifying financial statements, or practicing law. Every profession, and "sub-profession", has its share of hacks, crooks and incompetents. Hey, it wasn't an unenrolled practitioner who prepared the tax returns for Enron!

 

When it comes to “vetting” a potential “uninitialed” preparer it is important to ask all of the questions I discuss in WHAT TO ASK A PREPARER.