How to choose a Tax Professional

There are 4 categories of tax professionals who can legally represent you before the IRS and only 3 have unlimited rights, EAs, CPAs and attorneys.

  • EAs (Enrolled Agents). EAs are America’s tax experts. To earn an EA designation, the individual must pass a comprehensive 2-day exam administered by the IRS, or have been a former IRS employee with a minimum of 5 years experience in a professional position, e.g. revenue agent, revenue officer, etc. EAs are required to complete annual continuing education requirements similar to those of CPAs. Unlike CPAs who study and practice in all areas of accounting, EAs specialize in tax return preparation. A small percentage of EAs also specialize in representing taxpayers before IRS and state tax agencies.Some EAs are admitted to practice before the United States Tax Court as United States Tax Court Practitioners (USTCP) by means of passing the U.S. Tax Court Non-Attorney Examination. On average, EAs fees for services are less than CPAs. Many EAs are members of the National Association of Enrolled Agents.
  • CPAs (Certified Public Accountants). CPAs have an extensive background in accounting, pass tough exams, and maintain continuing education. They practice in all areas of accounting and bookkeeping. Specialized fields of accounting include fund accounting, working with external financial statements, operational accounting, tax accounting or budget preparation. On average, CPA charge more than EAs but less than attorneys. They may, or may not specialize in tax representation and can practice before U.S. Tax Court by means of passing the examination and gaining USTCP status.
  • Attorneys. Most attorneys do not prepare tax returns, but they can represent you in your tax matters with the IRS, just like CPAs and EAs. Most general practice attorneys do not specialize in tax law. However, there are attorneys who specialize in tax matters. Attorneys can represent you before the US Tax Court. If your tax problem involves criminal tax fraud, you should retain a tax attorney. If you’ve been contacted by IRS Special Agents from IRS’s Criminal Investigation Division, you should consider retaining an attorney who practices criminal law with an emphasis on tax matters.
  • Note: IRS Revenue Officers, Revenue Agents and Tax Compliance Officers handle civil tax matters. If your case has been assigned to a revenue officer that means your case has been assigned to IRS field collections. If your case has been assigned to a Revenue Agent, you are in the process of being audited by field examination. This audit may take place in your home or business location. If you receive correspondence from a Tax Compliance Officer, your case has been assigned to an IRS tax auditor to conduct an audit in an IRS office setting. Most of the time, any of these types of problems are best resolved by an enrolled agent (EA) or CPA who specializes in representing taxpayers before the IRS. If you’ve been contacted by IRS Special Agents, your case is being investigated by IRS’s criminal tax division and you should seek the help of a tax attorney.
  • Licensed and non-licensed tax preparers.Contrary to common belief, only two states in the U.S. require tax preparers to be licensed. With the exception of Oregon and California, a person is not required to be individually licensed to receive a fee for income tax preparation services. Licensed and non-licensed tax return preparers can represent you only before IRS examination division in the matters (audit) concerning tax returns that they personally prepared. They cannot represent you before IRS for anything else and cannot represent you before IRS Collection Division.

Tax return preparation and tax representation before IRS and State Tax Agencies

  • Tax return preparation. For most taxpayers who file their tax returns each year and do not have any outstanding tax liabilities for prior years, or any delinquent, unfiled tax returns, it’s simply a matter of choosing a tax return preparer that you feel comfortable with and have confidence in their competency. You have a choice between choosing a one-person business, large national chains and everything in between. Typically, from large companies you receive predictable service. The down side is that the service is often indifferent, you don’t develop a personal relationship with your tax preparer, and he or she may not even be with that company the following year. Many offices of the large national firms employ only one EA who handles the more complex tax return preparation and reviews the returns prepared by other return preparers in that office who may be relatively inexperienced. Beware that the big name by itself does not guarantee quality – it depends on the individual who actually prepares your tax return. From private practitioners, you get individual attention, flexibility, and the comfort of personally knowing the return preparer.
  • Tax representation. Tax representation work is entirely different from tax return preparation. EAs, CPAs and attorneys who specialize in tax representation work should have extensive knowledge of IRS collection procedures. When it comes to tax representation services, i.e. representing you before the IRS or state tax authorities, you want to select a representative that is qualified and experienced. You should look for a tax representative that is an EA, CPA or attorney who specifically states they specialize in “representing taxpayers before IRS”.  If you have both IRS and state tax problems, ask the professional if they have experience in handling both federal and state tax cases. Some tax professionals who specialize in representation matters only handle IRS cases and do not wish to represent you before state tax agencies. Once you’ve retained a tax professional, they should analyze your particular tax situation and develop a plan for resolution. There are three primary methods of resolving tax cases: Offer-in-Compromise (OIC); installment agreement (IA) and Currently-not-Collectible (CNC), also commonly referred to as hardship status. Bankruptcy may also be a possible solution for individual tax liabilities depending on when you filed and other factors used in determining whether the tax liabilities meet discharge criteria. An experienced tax representative will explore all options based upon your particular circumstances, will be able to tell you what options you qualify for, and recommend the best resolution to your case.

Warning signs when selecting a tax professional:

  • Avoid tax return preparers who claim they can obtain larger refunds than other preparers. This is a serious warning sign that the preparer may be unethical at the least, and could put you at risk for a future audit or more serious problems.
  • Beware of a tax preparer who bases their tax return preparation fees on a percentage of the amount of the refund. A practitioner may not charge a contingent fee (percentage of your refund) for preparing an original tax return.
  • If you owe back taxes, beware of tax representation firms that base their fee on a percentage of the amount of money they can save you by submitting an Offer-in-Compromise (OIC).
  • Beware of tax representation firms that unconditionally guarantee to resolve your case via an Offer-in-Compromise (OIC) before they conduct any financial analysis. Not all taxpayers qualify for an OIC.
  • Beware of tax representation firms that use sales people that cannot tell you the name of the individual that will represent you and their professional designation (EA, CPA or attorney). If they cannot provide a name and designation, but simply tell you they have an EA, CPA or attorney on staff, check further to see who your representative will be before payment of any fees.