You probably think I am going to say you should never use anyone but a CPA, but I’m not, because that isn’t true. When it comes to tax preparers, there are many choices, and it is the person, not the credential that matters.
Here is what the credentials mean:
Certified Public Accountant (CPA) – A CPA is going to have at least a bachelor’s degree, usually in accounting, and has passed a rigorous series of examinations to obtain the CPA designation. Before receiving the designation, most states require at least 1 year of experience. In Tennessee, where I am licensed, 80 hours of education is required every two years, essentially the same thing.
Why don’t I say a CPA is the best? Although a portion of the CPA exam is on taxation, not every CPA is a tax expert. It is certainly the case that many CPAs prepare taxes that do not have as much education or experience specifically in taxation as some non-CPA professionals.
I do feel, if you are going on nothing but certifications, a CPA is likely the best choice, but that is just my opinion. I also believe that if you are a small business owner, you should have a relationship with a CPA for reasons beyond taxes.
Enrolled Agent (EA) – This designation is not very well known. I feel bad for EAs because the EA credential is very good from a knowledge standpoint, but the public doesn’t know what it is.
An Enrolled Agent is a tax practitioner authorized by the Department of the Treasury to represent taxpayers before the IRS. The test to become an EA is specifically focused on the Internal Revenue Code. Enrolled Agents are quick to point out that they are the only professionals whose certification is specific to taxation.
Registered Tax Return Preparer (RTRP) –The RTRP designation means that the preparer has passed a test of minimum competency to prepare tax returns. Although the credential itself just establishes minimum competency, that does not mean that a preparer with that is only minimally qualified, but that is all the credential itself tells you. The IRS intended to require that preparers MUST be an RTRP if they were not a CPA, EA, or attorney. Due to a lawsuit, that requirement is currently on hold. I personally would not hire anyone who was not at least an RTRP.
Attorney – An attorney can prepare tax returns. There is nothing about becoming an attorney that means you know anything about taxes. If you are hiring an attorney to complete your tax returns, do make sure they practice heavily in tax. If you are hiring an attorney who does not also have one of the other credentials, look for them to have an LLM in Tax. An LLM is an advanced law degree. Tax attorneys are generally hired to prepare estate tax returns, gift tax returns, and do complex tax planning. As you may know, I am also licensed as an attorney in addition to being a CPA, but at Aull & Cooper CPAs I work only in the capacity of a CPA!
Unlicensed Preparers – If a preparer is not a CPA, EA, RTRP, or attorney, I would stay away regardless of any other factors.