I try not to post blogs this long, but consider this an important issue with a lot of information you should pay attention to. I am going to try splitting it into two parts. This first part will cover CPA’s, CPA/Attorneys and EA’s as potential tax preparers. The second part will discuss other options and conclusions.
I am often asked if there are advantages to using a CPA to prepare individual income taxes rather than some other tax return preparer. The answer as with nearly all tax related questions is “it depends”.
CPA’s often have some distinct advantages over other preparers as they have a very broad knowledge of business activities. The must pass a very extensive multi day examination which covers broad areas of accounting theory, business law, auditing, and taxes. They must have a specific amount of experience and maintain continuing education training every year to hold themselves out as a CPA. Many CPA’s have a well rounded capability to assist you with financial and retirement planning in addition to your income taxes. On the other hand, many CPA’s specialize in areas other than tax. They must also obtain their continuing education in a wide range of subject matter. Because my practice is fairly broadly based involving income taxes and business issues, I obtain nearly triple the required continuing education each year. When choosing one as a tax preparer, be sure their area of practice includes significant experience preparing taxes and that they get substantial continuing education which is income tax specific. Since I am a CPA, I certainly recommend them, but we will go through some of the advantages and disadvantages of other options below.
CPA/Attorneys are even more highly educated, many of them specifically in tax related issues. They also often command higher fees. In some situations there are attorneys who are not CPA’s who also specialize in taxes. But in general an attorney’s level of expertise is quite different than that of a CPA or EA (mentioned below). If you have a serious tax or criminal tax problem, you may consider a CPA/Attorney who has experience dealing in similar situations. While some attorneys operate good tax practices, I would not normally go to an attorney for regular tax preparation. A CPA/Attorney can sometimes be a good choice for estate planning needs because of their understanding of income taxes and other potential business issues.
Enrolled Agents (EA’s) also must pass an examination. It is income tax specific. Many enrolled agents are highly experienced in the income tax field. While some also have a good bit of accounting and bookkeeping expertise and experience, they may not have as much as a CPA. Some of the best tax preparers I know are EA’s. I would consider many of them to be great choices as tax preparers. Better than some CPA’s I know. If you have reasonably standard income tax returns, I would not hesitate to use an EA. If you have other business related needs or financial and estate planning needs, you should check the capabilities of the preparer carefully regardless of which credential they put after their name. While I know many EA’s who have excellent capabilities in these areas, I would probably look more closely at CPA’s if I have those needs.