Tax Preparation Professionals: How Are They Different from One Another?
You may have heard of CPAs, Enrolled Agents and CTEC Registered Tax Preparers - but are you familiar with their different requirements for certification? The main differences that separate these three types of tax professionals are: which government entity issues the license, education requirements, and renewal.
CPAs are licensed at a state level, and require the highest level of education credits. Though the requirements vary by state, CPAs are federally authorized to represent taxpayers before the IRS, perform audits, prepare financial statements, as well as prepare and sign tax returns.
The California Board of Accountancy’s education requirements for Certified Public Accountants are as follows:
Bachelor’s degree
A total of 150 college semester units, including:
24 units in Accounting subjects
24 units in Business related subjects
10 units in Ethics study
20 units in Accounting study
In addition to education requirements, applicants must pass the four-part CPA Exam, as well as the Professional Ethics Exam for CPAs, and possess 1 year of general accounting experience under a practicing CPA.
Certified Public Accountants must renew their license every two years. To renew, a CPA must possess a minimum of 80 hours of Continuing Education credits, with at least 50 hours in Technical Subjects, 4 hours of Ethics credits, and a minimum of 20 credits per year.
Enrolled Agents are licensed at a Federal level - enrolled agent status is the highest credential the Internal Revenue Service currently offers. In addition to passing the three part Special Enrollment Examination (SEE), applicants must pass a background check to show a clean personal tax history.
To apply for Enrolled Agent Status, the requirements are:
Obtain a PTIN (personal tax identification number)
Pass all three portions of the SEE within 2 years of registration
Apply for enrollment within 1 year of passing
Enrolled Agents must renew their status with the IRS every three years- obtaining 72 hours of Continuing Education credits between each renewal, with a minimum of 16 hours per year, and 2 hours of Ethics courses.
CRTPs, like CPAs, are licensed at a state level. Not every state has requirements for tax preparers, but in California, the California Tax Education Council is responsible for regulation. Any person who prepares or assists with tax preparation for a fee must register with CTEC, or face fines up to $5,000. CPAs, EAs, tax attorneys, and certain financial advisers are exempt from this requirement.
To register with the California Tax Education Council, the following education requirements must be met:
Complete a 60 hour CTEC-approved course
45 hours federal tax
15 hours state tax
In addition to 60 hours of approved coursework, applicants must obtain a PTIN from the Internal Revenue Service, as well as a $5,000 tax preparer bond from an insurance provider.
To maintain compliance with the California Tax Education Council, CRTPs must renew their status annually, completing at least 20 hours of CTEC-approved continuing education courses. A minimum of 15 hours of Federal tax curriculum, and 5 hours of California tax curriculum must be met to qualify for renewal.
Though all three preparers are licensed to compile and sign your tax returns, the requirements that must be met are vastly different. Which tax professional is right for you? Well, that could depend on your specific situation- if you own a business, require financial statements, or need IRS representation for an audit, a CPA may be your best bet. If you file a simple return or need a tax matter handled, you may choose to reach out to an Enrolled Agent or CTEC Registered Tax Preparer to save on preparation fees and speak with someone solely focused on taxes.
Questions on tax professionals, or if Deborah Morgan and Company is the right fit for you? Call 805-496-2828 for more information, or schedule an appointment for a free 30 minute New Client Consultation right now!
