If you’re considering a career as a tax professional, you may be curious (or even confused!) about the variety of career options available to you. Tax advisors can have many different titles, all stemming from distinctive types of education and certification. Tax career options are diverse, including Certified Public Accountants (CPAs), highly specialized Enrolled Agents (EAs) in addition to tax attorneys and tax preparers.. How do you know which path to choose?
We’ll explore qualifications, areas of expertise, and the specific types of tax and advisory services each tax profession offers.
CPAs
Certified Public Accountants (CPAs) undergo the longest and most challenging certification processes and education as tax professionals and are among the most qualified tax experts available. CPA credential requirements vary from state to state, but anyone seeking the designation must take the four-part CPA exam and complete 150 hours of higher education, usually resulting in a bachelor’s (and often a master’s) degree in accounting. Most states also require a would-be CPA to engage in a year or more of professional employment under the supervision of an experienced CPA.
What does a CPA do?
CPAs can do a lot more than prepare taxes. They may also provide bookkeeping services, help clients with long-term financial planning, prepare profit and loss statements, and conduct audits, to name just a few of the professional tasks they can accomplish. Since CPAs have several career options, not all become tax preparers. Many work as government accountants, auditors at public accounting firms, or in-house accountants at both small and large businesses.
Enrolled agents
Another kind of tax professional is an IRS enrolled agent (EA). Enrolled agents work exclusively in tax preparation and must pass all three sections of the IRS’s Special Enrollment Examination (SEE) within two years. This three-part test covers 1) Individuals, 2) Businesses, and 3) Representation, Practices, and Procedures.
They must also pass the IRS’s suitability check, which examines their past tax compliance and any criminal history. To maintain their enrolled agent status, EAs must complete 72 hours of continuing education every three years.
What is an enrolled agent?
Enrolled agents must undergo a certification process to become paid tax professionals. Whereas the CPA credential allows for working in non-tax-related fields, the EA credential is specific to tax preparation, so virtually all enrolled agents are professional tax preparers.
Tax attorneys
Tax attorneys are lawyers who specialize in tax law. They must have a law degree and pass a test administered by their state’s bar association to practice. Attorneys specializing in tax law must generally take continuing education courses to ensure they stay up to speed on changes to the Internal Revenue Code. Many tax attorneys may have a postgraduate degree known as a Legum Magister (LLM), where they have engaged in specialized advance study like tax law.
What does a tax attorney do?
Tax attorneys can engage in a wide array of tax-related services, including preparing tax returns, providing tax planning and advisory services, and representing clients before the IRS.
Tax advisors
A tax advisor is really an umbrella term for anyone with the certification and expertise to provide advice to clients on accounting and tax law. That includes CPAs, tax attorneys, financial advisors, and even enrolled agents. Generally, individuals and businesses retain the services of a tax advisor to reduce tax liability while remaining compliant with the Internal Revenue Code.
Tax preparers
The title “tax preparer” is a broad term that encompasses any person who is paid to prepare tax returns. One doesn’t need CPA or EA credentials to become a tax preparer. In fact, some successful tax professionals have no credentials at all, but many serious tax preparers eventually choose to become enrolled agents.
And while tax advisors may also be tax preparers, tax preparers are typically not tax advisors, meaning they do not have the education and credentials to provide complex tax planning advice.
Non-credentialed tax preparers can grow their tax knowledge and credibility by participating in the IRS’s Annual Filing Season Program (AFSP), a program to help serious, non-credentialed tax professionals stay informed on tax law and distinguish themselves from other non-credentialed tax preparers. The AFSP requires 18 hours of continuing education credits, including a six-hour Annual federal tax refresher (AFTR) course and subsequent comprehension exam, ten hours on federal tax law, and two hours on ethics.
Service bureaus
Service bureaus provide tax preparation software you can resell, branded under your own label. They also provide technical support and professional guidance to those who buy your branded software. As a tax professional, if you decide to operate a service bureau, you can increase your firm’s revenue by building a network of tax offices and helping other business owners find reliable tax preparation software.
What is a service bureau?
A service bureau offers tax software and professional guidance to business owners. They help tax professionals run their tax business and serve clients with up-to-date tax filing software.
If tax law interests you and you’re looking for a way to start your own business, , there are an array of career options for tax professionals, from tax attorneys to tax preparers. And a great way to start exploring a career or business opportunity in tax law is to start as a tax preparer.
