How to Choose the Right Tax Preparer

In the state of California, what accountant can receive pay to prepare your taxes?

Four types of individuals can legally prepare your taxes for a fee.

  1. Attorney: Although an attorney can legally prepare your taxes and charge you a fee, he or she might not have much tax knowledge, because his or her degree is not in accounting nor taxation.
  2. CPA (Certified Public Accountant): To become a CPA, one must pass state accountancy test.  The exam is broad in nature, covering accounting, business laws, audit, and more.  Due to this fact, some CPAs specialize in taxation, while others do not.  Like an attorney, a CPA may represent you before the IRS.  You can easily verify the credentials of a CPA at http://www.dca.ca.gov/cba/lookup.shtml.
  3. EA (Enrolled Agent): An Enrolled Agent must either pass exams strictly on taxation given by the IRS, or has extensive experience working for the IRS.  Due to this fact, the IRS does certify Enrolled Agents.  He or she has the power to represent you before the IRS or tax court. You can find out by calling IRS’s office of Professional Responsibility at 313-234-1280 or email them at opr@irs.gov (include the name and address of the preparer), or you can verify the Enrolled Agent’s credential in person.

 

  1. CTEC (licensed tax preparer): California Tax Education Council has oversight of thousands of tax preparers.  Anyone preparing taxes for a fee must meet CTEC educational requirements. Since attaining this license is much easier compared to the above, CTEC tax preparers cannot represent you before the IRS.
  2. No License: WARNING! Be extra careful with these people. They often have great stories, telling you that have lots of tax experience, that they have been an IRS agent, etc. Great story telling is entertaining, but certainly not when it is dealing with serious matter liking tax filing. At minimum, one must obtain a CTEC license. The State of California Franchise Tax Board states:

California law requires anyone who prepares tax returns for a fee and is not an exempt preparer to register as a tax preparer with the California Tax Education Council (CTEC). Exempt preparers are California certified public accountants (CPAs), enrolled agents (EAs), attorneys who are members of the State Bar of California, and certain specified banking or trust officials.

Make certain that you do your due diligence before hiring, because what you do not know can prove detrimental to your financial.

Top 10 Questions to Ask Tax Preparation Company and its Tax Preparer—Click to read more

Posted in Financial Tips