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Have you ever wondered, "What is a tax preparer?" Tax preparers calculate, file, and assist individuals and businesses with simple and complex tax returns. These professionals' main goal is maximizing clients' tax returns while adhering to applicable regulations.
In addition to tax return assistance, tax preparers can provide accounting, bookkeeping, and payroll services. Many tax preparers work full time, part time, or as independent contractors at accounting firms or private companies. Though these professionals typically work all year, many are busiest during tax season.
Tax preparers use customer service, financial analysis, data input, and data management skills regularly. Individuals with communication, critical thinking, and problem-solving skills may thrive in this role. The U.S. Bureau of Labor Statistics (BLS) projects tax preparer jobs will grow 4% between 2021 and 2031.
Are you still wondering, "What do tax preparers do?" Typical duties for these professionals include collecting financial records and preparing individual or business tax returns. Tax preparers update clients' tax information regularly, analyze past and current financial data, and communicate with clients about upcoming filings and deadlines.
Keep reading to learn more about the skills and areas of expertise for this profession.
Key Hard Skills for What Tax Preparers Do
Knowledge of Tax Laws: Tax preparers must understand tax laws and requirements. They prepare tax documents that adhere to these reegulations. Understanding tax laws enables tax preparers to find tax credits and exemptions that result in larger returns for their clients.
Tax Return Preparation: Tax preparers complete and submit tax return documents on behalf of their clients. Because every financial situation is unique, tax preparers must apply a variety of tax forms, deductions, and credits to each client's returns.
Computing and Calculating: While tax preparers use software to prepare taxes, filling forms out accurately requires math skills including arithmetic and algebra. These skills allow tax preparers to use the formulas they need to calculate taxes accurately.
Tax Preparation Software: This profession uses computing devices and tax software to improve accuracy and save time while preparing tax returns. Tax preparers should be familiar with tax software and how to use it to input data correctly.
Key Soft Skills for Tax Preparers
Critical Thinking: Tax preparers use logic and reasoning to analyze financial situations and provide accurate returns for their company, clients, and the IRS. Critical thinking skills help tax preparers determine proper deductions and credits on client tax returns.
Problem-Solving: These professionals identify problems and implement effective solutions during the tax preparation process. They should draw on their knowledge of tax laws and their clients' financial situations in order to maximize tax returns and prepare for future tax seasons.
Written and Verbal Communication: Clear, concise written and oral communication is crucial to this profession because tax preparers communicate with clients and the IRS. This includes explaining complex information about tax regulations and processes to people with limited financial and taxation knowledge.
Discretion: Tax preparation involves working with clients' personal and financial information, including details about their families, employment, and assets. Discussing a client's financial information for any other reason than tax preparation can result in fines and other penalties.
Tax Preparation Areas of Expertise
Tax preparers complete tax returns — but what does a tax preparer do in addition to this duty? Other facets of the job vary based on industry and position. Tax preparers can specialize in different fields tailored to specific client needs, including accounting, bookkeeping, and payroll services.
Tax Return Preparer
Tax preparers explain, arrange, and complete tax-related forms for clients. They also prepare these clients' tax returns. Accounting firms, tax businesses, and private companies employ tax preparers in full-time, part-time, and seasonal capacities.
Job applicants without a college diploma who want to enter the tax industry are often eligible for entry-level tax preparer positions. Experienced tax preparers may advance to senior positions that involve team and project management or more complex tax preparation tasks.
Common Job Titles
- Entry-Level Tax Preparer
- Associate Tax Preparer
- Tax Analyst
- Certified Public Accountant
- Enrolled Agent
- Tax Attorney
Along with preparing and filing tax returns, tax accountants track tax payments and tax refunds on behalf of clients in public and private sectors.
Tax accountants have thorough knowledge of tax laws and regulations. They hold relevant experience in accounting and bookkeeping. Entry-level tax accountants file individual and corporate tax returns, while senior-level accountants perform more complicated tasks, such as representing clients in tax disputes and auditing tax returns.
Tax accountants may advance to upper-level positions such as tax manager or tax director. More advanced tax accountant roles may also require additional training, education, and certification.
Common Job Titles
- Income Tax Accountant
- Income Tax Specialist
- Tax Accountant
- Tax Advisor
- Tax Consultant
- Tax Manager
- Tax Director
Many tax preparers also work as bookkeepers — professionals who provide accurate information and reports about businesses' finances. Bookkeepers help small and large businesses track financial transactions, maintain internal records, and ensure consistency between company finances and bank statements.
Some businesses will hire finance-oriented individuals with no prior experience and provide these employees with on-the-job bookkeeping training. However, many entry-level positions require a bachelor's degree or certified public bookkeeper credential.
Bookkeepers may begin their career as junior accountants or accounting clerks. With experience and additional certifications, bookkeepers can advance to senior bookkeeping positions or transition into CPA roles.
Common Job Titles
- Certified Bookkeeper
- Accountant Bookkeeper
- Junior Accountant
- Accounting Clerk
- Certified Public Accountant
Payroll accountants are accounting professionals who prepare, generate, and maintain payroll documentation. They typically work for small- or medium-sized businesses. Payroll accountants ensure employees are paid on time. They also manage commissions, benefits, and other financial accounts.
Payroll accountants are detail-oriented, analytical, and mathematically skilled. Entry-level payroll accountants, often called payroll clerks, focus on day-to-day functions like issuing paychecks.
After gaining experience, clerks may advance to payroll administrator or supervisory positions, which focus on tasks like running payroll reports and statements, ensuring compliance, and managing staff.
Common Job Titles
- Payroll Accountant
- Accounting Clerk
- General Accountant
- Accounts Payable Clerk
- Accounts Receivable Clerk
- Payroll Specialist
- Payroll Administrator
- Payroll Supervisor
How to Become a Tax Preparer
Becoming a tax preparer starts with gaining technical skills and knowledge of tax regulations. Many tax preparers accomplish this by obtaining an associate or bachelor's degree in an accounting-related field, though some applicants can qualify for entry-level positions with enough relevant experience.
In addition to technical knowledge and skills, the IRS requires all paid tax preparers to pass a suitability check and be issued a preparer tax identification number (PTIN). Tax preparers can also gain representation rights from the IRS by obtaining an enrolled agent license or a CPA certification, both of which require additional exams.
Tax Preparer Salary and Career Outlook
BLS data shows tax preparers earned an average annual salary of $51,080 as of 2021. Because these professionals are in demand across many industries in the U.S. and can earn several different certifications and licenses, salaries vary: For example, tax preparers in industries like management, legal services, and insurance all earn average salaries above $70,000.
The BLS projects these careers will grow 4% from 2021 to 2031 — as fast as the projected national average growth rate. This equates to 4,300 new jobs in that time period.
Career Spotlight: Logan Allec
Can you explain the similarities and differences between a tax preparer and a general accountant?
A general accountant keeps a company's internal set of books — their balance sheet, profit and loss, etc. — while a tax preparer takes those sets of books, makes any necessary adjustments required by federal and state tax codes, and properly reports them on the company's tax return. It's a similar story with individuals — most individuals don't have their own set of books, but in a sense, they are their own "general accountant" that provides their income and deduction amounts to their tax preparer, who reports this information on their tax return.
Why did you become a tax preparer? What initially interested you in the field?
I knew I wanted to do something with numbers and spreadsheets because I've always been a spreadsheet lover. Even when I was a kid, I loved tracking things in spreadsheets. In college, when you're interviewing with various public accounting firms, you have to indicate whether you want to work in audit or tax, since those are the two major types of accounting groups that new hires of public accounting firms generally fall into. I personally thought my tax classes in college were more interesting than my auditing class, so I picked tax, and the rest was history.
What education did you need to pursue this career? How did it equip you for your current role?
Technically, there's no federally mandated education that is necessary to become a tax preparer. However, a few states — including my own, California — require all paid tax preparers within the state to either be a certified public accountant (CPA), an enrolled agent (EA), a California-licensed attorney, or a California registered tax preparer (CRTP).
Personally, I went the CPA route. From an education perspective, in order to earn my CPA license, I had to obtain a bachelor's degree and complete 150 total college-level semester units, including 24 units in accounting subjects and 24 units in business-related subjects. I also had to study for and pass the CPA exam.
Although not all of the coursework and education I obtained is directly used in my current role, every accounting class I took taught me something and improved my ability to see business through an accounting lens, which has definitely made me a better CPA. I also eventually obtained a master's degree in business taxation, but that was not necessary for me to start my career as a tax preparer.
What was the job search like after graduating with your degrees?
The way it worked at my college is that students would generally lock down a job while still in college, so that's what I did. During my senior year, I interviewed at several accounting firms before finding one that was a good fit. Overall, it was a very competitive process — the year was 2009, and the economy was terrible at the time, so many students were vying for fewer spots than usual.
“While it can be tempting for a tax preparer to just 'trust the software,' that's a recipe for error-ridden returns.”
—Logan Allec, CPA
What does a typical day at work look like for you?
A typical day at work for me is a mix of responding to questions from both my clients and my staff, preparing or reviewing tax returns for clients, preparing or reviewing tax resolution options for clients who owe more money to the IRS or their state taxing authority than they can afford to pay, and creating content to generate leads for my tax business.
What are some of the most rewarding aspects of working as a tax preparer? Some of the most challenging aspects?
Probably the most rewarding aspect is making something that many people (especially business owners) dread — taxes — as painless a process as possible for them. One of the most challenging aspects is keeping up to date on tax law changes. Nearly every year, Congress tweaks the tax code at least a little bit, and every so often — typically when a new administration comes in — they tweak it a lot.
It can be difficult to remember the rules, especially at my firm where we prepare a lot of returns for people who haven't filed in years. So if I'm preparing, say, a client's 2016 tax return — which was from years ago — I have to remember (or at least know how to look up) what the tax laws were like for the 2016 tax year. Another challenging aspect is working with the IRS. Because my firm not only prepares tax returns but also helps clients resolve their tax debt, I have to communicate with IRS personnel a great deal, and they can frankly sometimes be difficult to get a hold of.
What do you think is the most important skill a tax preparer needs to succeed?
The most important skill is definitely attention to detail. Tax returns have several pages full of calculations on them. While it can be tempting for a tax preparer to just "trust the software," that's a recipe for error-ridden returns. A good tax preparer will always go through the tax returns they prepare line by line to ensure accuracy.
What advice would you give to students considering your career?
Read as much as you can in the news about taxes and tax law changes. Also, read U.S. Tax Court cases if you can. Reading how judges craft their opinions on tax law can really help someone entering the field to help build their "tax brain" — the ability to intuitively know what the tax implications are of any given situation.
Sometimes, tax news can be quite interesting! For example, just recently, actor Charlie Sheen settled his tax debt with the IRS in an offer in compromise — this is an agreement between a taxpayer and the IRS to settle the taxpayer's tax debt for less than they owe (this is something my tax firm specializes in).
Logan Allec is a CPA and tax relief expert who holds a master's degree in taxation from the University of Southern California. Starting his career working in the tax groups of various public accounting firms — including a Big Four firm — Allec now owns his own tax relief and preparation company, Choice Tax Relief. He lives in the Los Angeles area with his wife and children.
You can read more of Allec's insights on our top accounting skills for success page.
Questions About What Tax Preparation Is
What are the responsibilities of a tax preparer?
Tax preparers are responsible for completing, preparing, signing, and filing tax returns on behalf of individuals and businesses. They serve as an intermediary between clients and the IRS.
What skills do you need to be a tax preparer?
Skills required for tax preparation include math proficiency, logic, and critical thinking. Tax preparers also need knowledge of tax laws and regulations. They must be proficient with tax software. Excellent communication and interpersonal skills are also important for these professionals.
Is a tax preparer the same as an accountant?
No. While any accountant — including CPAs — can provide tax preparation services, tax preparers who are not accountants cannot perform all the same duties accountants do. CPAs and other accountants' education and licensure qualify them to perform a larger array of services than tax preparers.
Why do people go to tax preparers?
Filing tax returns is a complex, potentially stressful process. Clients use tax preparation services for convenience and peace of mind since tax preparers understand tax laws and regulations. Clients work with tax preparers to save time and file error-free tax documents that maximize returns.
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