What is a Tax Preparer? (The basics)
"A tax preparer is an umbrella term used for any professional who prepares and files tax returns on behalf of their clients for compensation. There are mainly two types of tax preparers, namely, licensed and non-licensed. Generally, non-licensed tax professionals are referred to as tax preparers."
Eligibility Criteria
The IRS doesn’t impose any education, experience, or licensing requirement for tax preparers to practice. It started the Registered Tax Return Preparer Competency Test for regulating tax preparers in 2011. However, it was discontinued in 2013. Therefore, you don’t have to pass any test to practice as a tax preparer.
However, you must have an active IRS Preparer Tax Identification Number (PTIN) to be authorized to prepare tax returns. This PTIN requirement applies to all tax preparers (including tax attorneys, CPAs, and enrolled agents). IRS-issued PTIN is valid for one year and has to be renewed annually.
Note that requirements for tax return preparers vary by state. It can range from taking a basic accounting or tax course to passing a state exam or nothing. Therefore, check with the state to understand its specific requirements. Then, fulfil the requirements and obtain the PTIN from the IRS after paying $35.95.
Standing with IRS
The non-licensed tax preparers usually fall into two categories depending on their representation rights before the IRS.
First, tax preparers enrolled for the IRS Annual Filing Season Program (AFSP). This program aims to encourage tax preparers to enhance their knowledge and prepare for a particular tax year.
Second, tax preparers with an active PTIN but without AFSP certification. Even without participating in the AFSP, they can file returns for their clients. But note that such tax preparers don’t have any representation right before the IRS.
Annual Filing Season Program (AFSP)
Tax preparers must do the following to participate in the program:
Renew their PTIN
Obtain 18 hours of continuing education (CE) from an IRS-approved CE provider (including a six-hour tax law course with a test)
Abide by specific obligations in Circular 230
The participants receive a Record of Completion after fulfilling all the requirements. This entitles them to limited IRS representation rights. For instance, they can represent the clients whose tax returns they have prepared before IRS employees. However, they don’t have the right to represent them for collection issues or appeals.
Kindly note that the AFSP is an optional program. The benefit of enrolling in the program is that IRS includes AFSP participants in its public directory of tax preparers. This can help them get new clients.
But... Pre-requisites for a CPA License do Exist.
CPA licensure requirements vary as per your state board. However, the basic pre-requisites for most state boards are as follows:
Education – Bachelor’s Degree with 120-150 credit hours
Examination – Score at least 75 on a scale of 0-99 within 18 months
Experience – 1-3 years
Ethics Exam (if required by your BOA)
The 55 US state boards or (BOA) have the statutory authority to issue the CPA license. Each state board has its own educational and experience requirements to fulfil for successful licensure. Hence, you must submit an official application for licensure to the respective BOA.
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