Tax Preparer Certifications: How to Advance Your Career

Tax preparer certifications: How to advance your career

Tax preparation is a career that is on the rise, bringing in a necessary and welcome service to the community. All businesses need to send their taxes to the government, and most rely on professional help to prepare and file their taxes correctly. With such an important and needed profession, how exactly does one become a tax preparer, and what certifications are needed to advance one’s career in tax preparation?

What is a tax preparer?

Tax preparers are experts in the field of taxes. They play a critical role in helping businesses and individuals prepare, file, and assist individuals and families with general tax forms while also maximizing their deductions. Beyond those basic services, tax preparers also can defend a taxpayer with the IRS. This includes working on tax court issues and audits related to the IRS.

However, the extent of what a tax preparer can do is based on the individual’s credentials and certifications and whether they have the right to represent the individual. Some tax preparers are certified public accounts (CPAs), and others have received licensure from the Internal Revenue Service (IRS) or other professional certifications. Tax preparers serve their clients by complying with the state and federal tax codes while also minimizing the client’s tax burden. While they are hired to serve their client, tax preparers must also follow the laws, regulations, and obligations to the IRS by not breaking any laws or helping to file a fraudulent return for the client.

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What does a tax preparer do?

A tax preparer is a master in their craft, in charge of completing tax forms for submission to the IRS. They can also provide tax advice to their fiduciary clients that ensures compliance with state, local, and federal tax laws. During the spring tax season, which are the busy months of the year, tax preparers are hard at work preparing and filing taxes to the IRS for their clients. A tax preparer’s clients are typically individuals or businesses, although some tax preparers work exclusively for employers. These tax professionals can pursue an IRS certification or remain uncertified, although this decision can limit a tax preparer’s fiduciary rights on how they are allowed to service their clients. Certifications and other distinctions are required for various states, so depending on location or type of service provided, tax preparing professionals may vary on their level of certification or distinct qualifications attained.

Besides preparing tax returns, credentialed tax preparers can retain other titles depending on their certification or distinction level. These include enrolled agents, tax attorneys, and CPAs. These positions can all represent clients during tax-related court issues with the IRS, including audits, payments, and court cases. Individuals often entrust tax preparers with their valuable personal information related to their finances, annual income, marital status, dependents, and their Social Security and Medicare deductions. Therefore, it is important for tax preparers to prioritize the privacy and confidentiality of the client as a trusted fiduciary.

How to become a tax preparer?

1. Education

A tax preparer must have a high school diploma or GED at a minimum while obtaining a college degree in the field of business. Many tax preparation companies look for candidates with a bachelor’s degree in accounting, finance, or economics. One should also think about focusing their course load on accounting subjects such as reporting, taxation, and audit to stand out to employers. Courses on writing, math, and business will prove useful for a tax preparer’s career.

2. Training

Outside of training, a tax preparer should focus on taking online tax preparation courses to advance their career. One can also shadow an on-the-job tax preparer and see how they conduct business and prepare and file taxes on behalf of their client. A great accreditation to have as a tax preparer is through the Accreditation Council for Accountancy and Taxation or the National Association of Tax Professionals. Some topics that are covered through these programs are Taxpayer filing status, Taxpayer interviews, State tax codes, Calculation of refunds, Annual filings, and Tax forms.

3. Receive Valid ID

To legally become a tax preparer, one must obtain a Preparer Tax Identification Number or PTIN. To acquire a PTIN, one must fill out an application and take part in a tax preparation screening process. After the application is received and approval is granted, one can earn the title of unenrolled preparer. This title provides one the ability to have the clearance to file basic tax returns on behalf of an individual or business. Depending on the state of residency and work, this may be the only requirement; however, this may vary from state to state, so it is imperative to look up a state’s laws and regulations regarding tax preparation status and eligibility.

In order to have the ability to run one’s own tax preparation business, one should obtain an Electronic Filing Identification Number, or EFIN. This number is also registered through the IRS and performs additional credit and criminal background checks as part of the application process. If approved, one can electronically file tax returns on behalf of their clients.

4. Obtain a tax preparation license in your state

Some states may require extra steps in the tax preparation processes. If a tax preparer is a resident of California, Maryland, Connecticut, Nevada, New York, or Oregon, if is important to get a state license along with one’s PTIN. Additional requirements may be requested depending on each state. In California, residents must take 20 hours of tax preparation education each year, while residents in Connecticut must get a permit through the state’s Department of Revenue Services every two years. This is why it is essential to check in with the state’s regulations on their up-to-date requirements before one begins to service clients.

Accreditation Council for Accountancy Taxation v.s the National Association of Tax Professionals

The Accreditation Council for Accountancy Taxation, or ACAT, is a credentialing organization dedicated to upholding the highest standards in taxation. This organization recognizes tax professionals with high levels of expertise, knowledge, and ethics in the fields of accounting and taxation. ACAT has four credentials designed to enhance a tax professional’s standing within the taxation industry and open doors to new opportunities. These broad ranges of credentials in the accounting and taxation space include the Accredited Tax Preparer (ATP), the Accredited Business Advisor/ Accountant (ABA), the Accredited Tax Advisor (ATA), and the Accredited Retirement Advisor (ARA). These credentials, especially the ATP, can immensely help advance the career of a tax preparer.

Meanwhile, the National Association of Tax Professionals, or NATP, is a professional membership group that is tailored to taxation professionals. Whether one is an entry-level tax professional just starting in their career or an experienced veteran in tax preparation, the NATP is an organization that is built for tax specialists of all types. The NATP has resources for tax preparers that can’t be found anywhere else. These resources and connections within the organization helps tax preparers succeed, grow, and advance in their careers. As tax laws and the overall tax industry change, NATP has the guidance and professional advocacy within the government to update tax preparers on the new federal tax code. NATP has a massive nationwide network with a community full of tax preparers looking to advance their careers and help better their client’s financial situation with the most up-to-date accurate information. Being informed of industry updates and new ways to apply tax codes to a client’s tax returns is crucial for tax preparers to do their jobs; NATP members receive weekly email updates on the latest tax laws and industry news.

FAQs

What are two common credentials for tax preparers?

Individuals looking to become a tax preparer can become a CPA or an enrolled agent. Enrolled agents must pass the SEE exam, while CPAs must pass the Uniform CPA Exam and complete professional and educational requirements set by their state.

What makes a successful tax preparer?

Tax preparers must demonstrate attention to detail and strong organizational skills in order to succeed in the taxation industry. They must be able to enter data efficiently into tax preparation software, collate multiple tax return schedules, and properly share tax returns with their clients and file them to the IRS on a timely basis.

How does a tax preparer get clients?

Tax preparers often start by promoting with their network. Professional connections, friends, and family members are all often potential clients for tax preparers. To start with one’s practice, one should not be afraid to mention one’s tax preparation services to close family and friends to see if they are interested, as they can often be perfect first referrals for a practice.

What is the demand for tax preparers?

Overall, the job outlook for Tax Preparers has improved and been positive since 2004. Vacancies for tax preparers has increased by 20.42 percent nationwide since that time, with the average growth rate at around 1.28 percent per year. Demand for tax preparers is expected to stay on the rise as an expected 25,340 new jobs will be filled by 2029.

Are you ready to  double your income while working half the time?

YES. I’m ready!