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Tax preparers, part 2: credentials and legal responsibility

On Behalf of | Jan 21, 2015 | Internal Revenue Service

In the first part of this post, we began discussing the importance for millions of taxpayers of choosing the right tax preparer. As we noted, a very basic place to start is with making sure that the preparer has a Preparer Tax Identification Number (PTIN).

But there are several other factors to keep in mind as you choose a preparer to work with. In this part of the post, we will discuss the various credentials that different types of preparer have. We will also discuss consequences for the taxpayer that can result from fraud by a preparer.

In addition to verifying that a preparer has a PTIN, it is important to be aware of what other credentials the preparer has. The IRS is promising to roll out a searchable online national directory with these credentials and certifications this year.

Keep in mind that there are various types of tax professionals, each with a somewhat different regulatory structure. There are three types – attorneys, certified public accountants (CPAs) and enrolled agents – that have unlimited rights to represent clients before the IRS.

Attorneys and CPAs are generally licensed and regulated at the state level. Enrolled agents are licensed directly by the IRS, after passing a comprehensive exam, and must comply with continuing education requirements.

There are also “unenrolled preparers” who can voluntarily participate in a new IRS regulatory program. The program is aimed at promoting professionalism among non-credentialed tax preparers.

Non-credentialed preparers who don’t participate in this program can still prepare returns. But beginning next year, they will not be able to represent clients before the IRS if a tax dispute arises – even if they prepared the return.

In short, there is a crowded landscape of players for tax preparation.

But the most important point for people choosing tax preparer to understand is this: if a preparer commits fraud on your return, you can be held legally responsible. That is why the IRS advises taxpayers to never sign a tax return that has been left blank.

Source: IRS.gov, “Choosing a Tax Professional

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