Tuesday 3 January 2012

Best tax preparation help for you


In the upcoming weeks, the World Wide Web will be flooded with articles relating to finding the right tax professional for your return preparation.

You will be hearing terms such as CPA, RTRP, EA, ERO – what not beside the tax professionals’ names in advertising. What do they all mean?

First and foremost, to prepare a tax return, a preparer needs a PTIN (Preparer Tax Identification Number). This is issued by the IRS to paid preparers so that they need not use the Social Security Numbers on the prepared returns.

As of now, for acquiring a PTIN, no training is needed. However, it is expected that by 2013, a pass in a specially designed minimum competency test will be mandatory for preparation of tax returns.

An RTRP (Registered Tax Return Preparer) will also be required to spend 15 hours annually in tax related continuous education measures. The new program will also include a mandatory background check on tax preparation applicants so as to dig out those with a criminal record. By 2013m, any tax preparation aspirant will need to pass the competency test and get through the background check to acquire the PTIN.

A CPA (Certified Public Accountant) will have an accounting degree. The accountant will have served under a CPA for a specified period and taken up extensive tests. The state issue the CPA certificate, and the requirements vary from state to state. They also need to meet annual continual assessment tests in all areas of accountancy including tax and audit.

A JD (Attorney) is a law school graduate, having passed the state bar exam for practicing law in that state.  They need to have continuing education in all areas of law including taxation.

A preparer, by working for the IRS or taking comprehensive tests in all areas relating to tax qualifies to be an EA (Enrolled Agent). Their continuing education requirement will specifically pertain to taxation for 3 years spread over 72 hours, and can practice in any state.

An ERO is an Electronic Return Originator who can electronically file tax returns. For taxpayers who have prepared their own return or for tax preparers who do not offer e-filing, this is applicable. In case the ERO is also a qualified CPA / RTRP / JD / EA, they can prepare the return too apart from filing it.

So, from the above listed specialists, whom do you need?

If you need to just e-file your return, all you need is the ERO.

If you are looking for a preparer, here are a few pointers to keep in mind:

Ø      Who is recommended? | Check on the IRS certification
Ø      Check out the fee charged | pre-determine how much you can spend
Ø      Ensure accessibility of preparer | what does the preparer have to say?
Ø      List down your other specific requirements

If you mark the 3rd party designee box on the return, in case issues arise with the IRS, a general preparer can help you on accounting & audit issues. An EA, CPA or JD can represent you on any issue thrown up by the IRS.

These are the major tax preparation options available. Choose what suits you best, good luck with your taxes!

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