The IRS is presently conducting a tax return preparer review aimed at developing new tax preparer performance standards. By year-end, the IRS Commissioner will propose a comprehensive set of recommendations to ensure uniform and high ethical standards of conduct for tax preparers. It is very likely that the end result will be a new form of regulation of tax preparers.
Here in the state of Pennsylvania, you need a license to practice law, work as a hair stylist, or be a dog groomer … but anybody can prepare taxes for you! This lack of regulation has inevitably led to some pretty shabby tax work by “professional” tax preparers.
Until this new IRS legislation passes, how can you be sure your tax preparer knows their stuff? While some states have tax preparer licensing (like Oregon), most states do not. At present, there are two Federally-recognized groups that would already qualify for any tax-licensing standards that the IRS comes up with:
- CPA, or Certified Public Accountants. While they may go on to specialize in any number of accounting functions that have nothing to do with individual and small business taxes, all CPAs have passed a test that requires proficiency with Federal tax law.
- EA, or Enrolled Agents. These tax professionals are licensed by the IRS, unlike CPAs who are licensed by the individual states. EAs have a solid technical expertise in the field of taxation and have also passed a rigorous test to prove their knowledge of tax law. They must pass an extensive background check before being licensed and must complete ongoing professional education each year.
By selecting a CPA or EA for your tax preparation, you will know that your tax preparer has the solid training and ongoing education necessary for staying up-to-date with the ever-changing tax laws. And when tax preparer regulation passes into law, you can rest assured that the CPAs and EAs will still be here, while other tax preparers will have to scramble to meeting education requirements and pass proficiency tests.
Disclaimer — it’s only fair to mention that I am one of the 40,000 Enrolled Agents in this country. As the Chairman of NAEA’s Government Relations Committee puts it, “it is the Wild West out there right now, and we need to bring the sheriff back to town. EAs believe that in order to be successful, any return preparer program must significantly increase taxpayer access to competent and ethical tax preparation services.”
Deb Howard Greenleaf, EA, CEO and Principal, of Greenleaf Accounting Services provides virtual accounting and bookkeeping services and specializes in financial management to consultants, coaches, solo professionals, and other small business owners across the US. Deb is an Enrolled Agent (EA)—an IRS-licensed tax professional—and specializes in small businesses and entrepreneurs filing Schedule C or as an LLC. As an Advanced Certified QuickBooks ProAdvisor, Deb spends her day in QuickBooks Online and specializes in providing QBO support.