An Overview of Tax Accounting
| Accounting.com Staff
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Each year, over 100 million Americans file their federal, state, and city income taxes. Faced with changing rules and regulations, filers often turn to knowledgeable tax accountants to prepare their taxes.
On the job, tax accountants meet with clients (individuals or corporations), identify tax deductions, and track paperwork. Some certified accountants even represent their clients in front of the IRS if the government agency should audit the return.
If you're interested in tax accounting jobs, you can use the information in this article to learn about tax accounting and how to enter this growing field.
Tax accounting careers require strong analytical, research, and math skills. To stay current on the latest tax laws and software, these professionals must become lifelong learners and take professional development courses -- especially if they possess a license or certificate. Although rigorous, many tax accounting careers boast tremendous flexibility, as most Americans only need tax accountant services in the spring months.
If you're interested in tax accounting jobs, you can use the information in this article to learn about tax accounting and how to enter this growing field.
Tax Accounting Careers
Tax accounting careers have a variety of job titles, including tax preparer, audit manager, tax accountant, and corporate controller. Their job title, along with the industry in which a tax preparer works, affect a professional's job responsibilities and salary. The IRS employs almost a dozen types of tax professionals whose duties range from interviewing tax filers to representing the U.S. in tax court. Federal, state, and local government agencies also use tax accountants to review residents' other taxes (e.g., property taxes).
Outside of government, many tax accountants work for major tax filing companies. At these companies, tax preparers may work one-on-one with clients and answer questions. These companies also hire Certified Public Accountants (CPAs) -- tax accountants who passed a rigorous certification process. CPAs can work independently or pursue advanced positions at an organization. According to PayScale, average entry-level CPAs earn $52,000 a year, while experienced CPAs can earn more than $80,000 a year.
Although many tax accountants are CPAs, not all careers require this certification. However, positions that do not require this credential usually pay less. For example, experienced tax accountants without a CPA earn about $15,000 less per year than experienced CPAs. Earning a CPA may represent a wise financial decision.
Especially ambitious tax accountants can earn both a CPA and a law degree. Tax lawyers represent their clients in court and in front of the IRS. Their expertise results in high salaries, with experienced tax lawyers making more than $110,000 a year.
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At tax preparing offices around the country, tax preparers prepare and file clients' income taxes. Typical tax preparers do not possess CPAs but often work alongside certified professionals. Most tax preparers have other jobs to fill their time after tax season. Of all tax accounting careers, tax preparers earn the lowest salaries.
- USE SOFTWARE: Tax preparers use tax filing software to input their clients' data and submit tax reports to the IRS. When their companies or organizations adopt new software, they take training courses to learn the latest best practices.
- MEET CLIENTS: Tax preparers interview clients to determine which tax forms clients should submit. This responsibility requires good interpersonal skills and knowing which types of questions to ask.
- ORGANIZE FINANCIAL INFORMATION: After speaking to clients, tax preparers organize and analyze their clients' financial documents. These documents may include W-2s, receipts, and 1099s.
- FILLING OUT TAX FORMS: Once tax preparers know how to use tax software, they fill out digital forms. After finishing, they go over the forms with clients to ensure accuracy.
- FILING TAX FORMS: Once a client confirms the forms' accuracy, tax preparers file these documents with the IRS. Tax preparers provide confirmations to their clients and maintain copies in case of an audit.
- Employment Numbers: As of May 2018, about 68,000 Americans worked as tax preparers. Few tax preparers work year round, as most Americans do not need tax preparers between May and December.
- Salary: Tax preparers earn a mean annual salary of $46,860. Tax preparers who work and live in major metropolitan areas tend to earn more than professionals who work in less-populated, rural areas.
- Projected Growth: In recent years, the tax preparing profession grew about 1.6% annually. Additionally, recent changes in federal tax law suggest that even more Americans might need tax preparation services in the coming years.
|Education Requirements||Although most tax preparers have earned a college diploma, high school graduates can pursue this career if they complete a certification program. However, more lucrative positions within tax preparation companies require a bachelor's or master's degree.|
|Experience Requirements||Tax preparers do not need prior experience. As a result, this profession represents an excellent opportunity for recent graduates, as well as for experienced professionals exploring new career paths.|
|Certified Public Accountant||Lucrative tax accounting careers require applicants to earn CPAs. This in-demand certification involves passing a four-part examination. Each state sets other requirements for licensure, such as holding a bachelor's or master's degree in accounting.|
|Enrolled Agent||The IRS grants EA certification to tax accountants who pass a three-part examination. Like CPAs, EAs can represent their clients in a variety of circumstances. The EA designation also opens up new career opportunities and increases salary potential.|
|Preparer Tax Identification Number||Tax preparers with or without other qualifications need a PTIN to prepare and file tax returns on others' behalf. American citizens can obtain a PTIN from the IRS in just 15 minutes.|
Like tax preparers, tax/audit managers prepare tax returns. However, they have additional responsibilities and most work full time throughout the year. These professionals oversee tax preparers' work to ensure its accuracy. They also report inconsistencies to upper management and make recommendations to improve their organization's efficiency.
- ANALYZE DOCUMENTS: On the job, tax/audit managers analyze clients' financial documents and less-experienced employees' work. When they find inconsistencies, they perform interviews and create reports for company managers.
- PERFORM AUDITS: Tax/audit managers may go through their organizations' financial documents to ensure accuracy. Other managers work exclusively with clients' financial records. This work plays a significant role in ensuring that an organization remains credible in its clients' eyes.
- COLLABORATE WITH OTHER TAX ACCOUNTING PROFESSIONALS: Most tax/audit managers' responsibilities involve working alongside their peers. Collaboration can reduce the time needed to complete complex tasks and lower the odds that managers miss mistakes in tax documents.
- PROPOSE SOLUTIONS: Even in well-run companies and organizations, senior managers turn to tax/audit managers to improve efficiency. Managers analyze other employees' work to find ways to save their employers money.
- ORGANIZE FINANCIAL RECORDS: Tax/audit managers ensure their organizations' financial health by keeping organized records. This responsibility may involve maintaining physical and digital documents. For the latter, managers use specialized software and database services.
- Employment Numbers: As of 2016, over one million Americans worked as accountants and auditors. Professionals in this group may have different job titles, despite performing similar duties.
- Salary: The median salary for tax/audit managers is $70,500 a year. This income allows professionals to live comfortably in nearly all rural/suburban settings and many metropolitan areas.
- Projected Growth: The Bureau of Labor Statistics (BLS) projects that from 2016 to 2026, the number of accountants and auditors will grow by 10%. This growth rate exceeds the average projected growth rate for all professions in the U.S.
|Education Requirements||Companies that hire tax/audit managers require applicants to possess bachelor's degrees in accounting, business, or a similar field. Some companies may allow applicants to substitute experience for education.|
|Experience Requirements||Entry-level positions do not usually require professional experience. However, managerial-level positions may need five or more years of accounting experience.|
|Certified Public Accountant||Nearly all tax/audit manager positions require applicants to possess a CPA credential. This certification allows managers to file reports with the Securities and Exchange Commission -- a common job duty.|
|Certified Internal Auditor||The Institute of Internal Auditors awards this certification to auditors who pass a 325-question exam. CIAs stand out from other managers and CPAs because they possess advanced organizational governance expertise.|
Tax accountants share many responsibilities with tax/audit managers. For example, they collaborate with peers and use their analytical skills to find financial discrepancies. However, tax accountants often have fewer responsibilities than tax/audit managers, who often oversee tax accountants' work. The following sections cover career responsibilities, job statistics, and certification requirements for tax accountants in greater detail.
- EXAMINE FINANCIAL DOCUMENTS: Tax accountants examine receipts, spreadsheets, invoices, and other financial documents when preparing clients' taxes. Their responsibilities require strong analytical skills and attention to detail.
- INTERVIEW CLIENTS: Like many tax accounting careers, tax accountants interview clients to learn about their financial histories. Tax accountants use this information to fill out tax returns accurately.
- COMPLETE PROFESSIONAL DEVELOPMENT: When tax laws and regulations change, tax accountant can stay up to date by completing professional development courses. Professionals also take these courses to fulfill recertification requirements.
- PREPARE FINANCIAL RECORDS: Although software can make preparing financial records, such as tax returns, much easier, tax accountants still need to understand tax laws and regulations to ensure the final product's accuracy.
- WORK WITH COLLEAGUES: Collaboration plays a significant role in tax accounting careers. Professionals may turn to their peers for advice and work together on complex tax issues.
- Employment Numbers: As the BLS lumps tax accountants and auditors together, the employment numbers resemble those of the previous section. Approximately 1.4 million professionals work as either tax accountants or auditors in the United States.
- Salary: According to PayScale, tax accountants earn about $56,000 a year. Experienced professionals can make closer to $70,000 a year.
- Projected Growth: Similar to tax audit/managers, the BLS projects that the need for tax accountants will increase faster than average from 2016 to 2026. College graduates should not have trouble finding tax accounting careers in the coming years.
|Education Requirements||Careers in accounting and taxation require applicants to possess bachelor's degrees -- usually in accounting, business, or a related field.|
|Experience Requirements||Most entry-level tax accounting careers require no formal experience. However, employers may value applicants who completed internships while they were in college. College students can research internship opportunities either through their schools or on popular job search websites.|
|Certified Public Accountant||Becoming a CPA can enhance tax accountants' career prospects and salary potential significantly. This certification also allows tax accountants to work independently. As earning a CPA does not require professional experience, aspiring tax accountants should consider earning the CPA certification as soon as possible.|
|Preparer Tax Identification Number||The IRS requires that tax professionals who file taxes for other people obtain a PTIN. Applying takes only a few minutes, and the IRS does not enforce any professional or education requirements.|
Corporate controllers analyze other tax professionals' work to create economic forecasts for their organizations. These professionals report directly to senior management. Other workers with similar responsibilities include financial managers, risk managers, and insurance managers. Typical corporate controllers possess one or more industry certifications and significant work experience.
- REPORT FRAUD: Corporate controllers act as the last line of defense against corporate fraud. If they detect fraud in financial documents, they may alert senior management or conduct a private investigation to find those responsible.
- SET BUDGETS: As departmental managers, corporate controllers create and follow a budget. Before instituting a budget, they make a proposal to senior management.
- REVIEW FINANCIAL DOCUMENTS: Experts in their field, corporate controllers review other employees' work to ensure that other workers follow the law and meet regulatory compliance.
- MANAGE EMPLOYEES: LIke other financial managers, corporate controllers manage and mentor less-experienced employees by giving performance reviews. This responsibility requires strong interpersonal and leadership skills.
- GIVE PRESENTATIONS: Corporate controllers regularly update senior management by delivering presentations.
- Employment Numbers: According to the BLS, more than 500,000 corporate controllers and other financial managers work in the United States. These experienced professionals manage less-senior tax professionals working throughout the country.
- Salary: According to PayScale, corporate controllers earn an average salary of about $96,000 a year. This impressive salary allows corporate controllers to live comfortably in nearly all major metropolitan areas.
- Projected Growth: The BLS projects that corporate controller and other financial manager positions will grow by 19% from 2016-2026. This projection indicates that entry-level tax professionals could benefit from many open managerial positions once they obtain experience and additional certifications.
|Education Requirements||Although many corporate controller positions require only a bachelor's degree, a master's degree in accounting or a similar field can set candidates apart from other applicants.|
|Experience Requirements||Corporate controllers often start their careers as entry-level tax preparers or accountants. After gaining ample experience and industry certification, they can apply to work in this managerial-level position.|
|Certified Public Accountant||To perform their jobs successfully, corporate controllers typically need to become CPAs. Many open positions require this certification.|
|Certified Management Accountant||After tax professionals gain two years of experience, they can become CMA candidates. Some employers may prefer the CMA credential over the CPA, as the CMA exam covers somewhat different topics than the CPA exam.|
|Chartered Financial Analyst||Tax professionals entering the investment management field should consider earning the CFA credential. This certification requires intensive study and three years to complete.|
|Master of Business Administration||Corporate controllers who earn MBAs can apply to more manager-level positions than their peers who possess only bachelor's degrees. Most full-time students can earn this degree in two years.|
Uncover illicit activity and track criminal funding.
Oversee financial operations to lead a business to success.
Assist organizations and individuals with financial reporting and accounting tasks.
Report fiscal standings to investors and the public.
Ensure compliance with financial laws and regulations in a variety of industries.
Manage budgets, expenses, and revenues at all levels of government.
Use statistics to manage pensions and assess investment risks.
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