If you hire a tax preparer, be sure to do your research even if you have been going to the same person for years. Tax preparers are facing new rules and regulations on both the federal and state level.
California law is very specific on the types of tax preparers who can prepare your tax return for a fee. To top it off, the IRS is now adding to the list of tax preparer acronyms as part of its new initiative to better regulate the industry.
Below is a list of who can prepare tax returns for a fee and what to know about each one:
- Attorney- By law, any attorney, not just tax attorneys, can prepare your tax return for a fee. You should always verify the attorney is familiar with the latest tax laws regarding your financial situation.
- Certified Public Accountant (CPA)- Despite common assumptions, not all CPAs are experts on tax preparation. There are different areas of expertise for CPAs. Similar to attorneys, you should first verify if the CPA handles tax issues.
- CTEC Registered Tax Preparer (CRTP)- The California Tax Education Councils (CTEC) requirements for CRTPs focuses solely on tax preparation. They are the only tax preparers required by law to complete tax education requirements on both federal and state tax laws. CRTPs are also required to obtain a $5,000 surety bond to protect clients against fraud.
- Enrolled Agent (EA)- The IRS regulates EAs. Similar to CRTPs, the requirements for EAs focuses on tax preparation. EAs must pass a stringent IRS exam, plus complete continuing education requirements on federal tax laws.
- Registered Tax Return Preparer (RTRP)- As of 2013, the IRS requires anyone who prepares federal tax returns for a fee, and is not an attorney, CPA or EA, to become a RTRP. RTRPs must pass a basic competency exam, plus complete continuing education requirements. If you hire a CRTP, verify he/she is also an RTRP or is in the process of becoming one.
Ready for another acronym? As of 2011, the IRS is requiring all paid tax preparers to have a valid Preparer Tax Identification Number (PTIN). The goal is to keep better tabs on tax preparers and their work. If the tax preparer does not have a PTIN, walk away.
CTEC is a nonprofit organization that was established in 1997 by the California State Legislature to protect taxpayers against fraud and incompetent tax preparers. To report unregistered tax preparers, visit www.ctec.org or call (877) 850-CTEC.