Each year, tax preparers help millions of Americans prepare and file their taxes. These professionals use their expertise to ensure that clients pay the correct amount to the government. To regulate the tax preparation profession, the IRS and many state governments grant certifications and licenses to qualified professionals.
Though not required to prepare taxes in many states, certification can bring valuable benefits, including a higher salary and job security.
Tax preparation certification yields more job opportunities and allows tax professionals to represent clients before the IRS. The following sections cover tax preparer credentials and exams. Keep in mind that requirements to become a tax preparer may vary among states.
Why Get Tax Preparer Certification?
Certified tax preparers (e.g., authorized agents, certified public accountants, and tax attorneys) enjoy many career benefits, including increased job security and earning potential. The certification process is a wise investment that can grow your career and help you establish a bigger client base.
- Tax preparer salaries are often high, especially for certified public accountants and authorized agents who complete rigorous training courses and exams. Even non-certified preparers can benefit from high hourly salaries if they possess specialized training and experience. Employment in large metropolitan areas often makes for some of the highest tax preparer salaries.
- Since the IRS requires Americans to pay their federal income taxes by April 15, most Americans only need tax preparation services in the spring. For the remainder of the year, tax preparers can pursue other professional and personal opportunities while still offering their services to people in need.
- Larger Client Base
- An accountant who becomes a tax preparer can offer their services to a larger client base to increase their job security and salary. More clients can also result in positive word-of-mouth, allowing accountants to build their personal brands faster than if they had not become tax preparers.
- Lifelong Learning
- Accountants in all specialties can complete professional development courses to learn the latest best practices and laws in the field. Certified tax preparers must complete these courses to keep their certifications active. With an emphasis on lifelong learning, tax preparation professionals always have an in-demand skill set that employers and clients need.
How Do You Qualify for a Tax Preparer License?
Tax preparers fall into one of two categories: limited or unlimited representation rights. Those with limited representation require no license or certification, but they can only work with clients whose tax returns they personally have completed and signed.
Tax preparers with unlimited representation rights can take new clients regardless of who signed their tax returns. These professionals can also handle audits and appeals for their clients.
To hold unlimited representation rights, tax preparers must earn certification as enrolled agents (EAs), certified public accountants (CPAs), or attorneys. Each of these career paths requires candidates to pass an exam and acquire an IRS preparer tax identification number (PTIN).
However, educational, professional, and examination requirements for these career paths vary, sometimes depending on location.
To hold unlimited representation rights, tax preparers must earn certification as enrolled agents (EAs), certified public accountants (CPAs), or attorneys.
Becoming an enrolled agent requires no specific educational background. Candidates must pass a suitability check of prior criminal background and proper tax return completion. Though not required, a certificate in accounting can help job prospects.
To qualify for a CPA certification, candidates must meet educational requirements that their home state establishes. In every state, CPA candidates need at least 150 credit hours of higher education. A typical bachelor’s degree entails only 120 credit hours, so students may need to take extra classes or pursue graduate degrees.
One common path is completing a bachelor’s degree in accounting before pursuing a master’s degree in taxation. Others may hold a bachelor’s degree in an unrelated topic and pursue a master’s degree in accounting or actuarial science.
Candidates should always check local requirements, since some jurisdictions require a minimum number of credit hours in accounting, auditing, business, accounting information systems, law, or related classes.
International candidates can also become CPAs, but they must apply through a chosen U.S. state and follow its established educational guidelines.
- Read about certificate programs in accounting
- Read about associate degree programs in accounting
- Read about bachelor’s degree programs in accounting
- Read about master’s degree programs in accounting
- Read about master’s degree programs in taxation
- Read about master’s degree programs in actuarial science
EA candidates need no professional experience. However, former IRS employees may qualify for enrollment without taking the required exam.
As with the educational requirements, each state determines the necessary professional experience to qualify for a CPA license. Candidates generally need at least one year of accounting, taxation, financial advisory, or consulting experience. Some states also accept government, private industry, academia, or public practice experience.
What Are Certified Tax Preparer Exams?
Ten years ago, the IRS required a tax preparation competency test for anyone not certified as an EA, an attorney, or a CPA. The organization removed this requirement in 2013 and no longer offers a general certification exam.
EAs strictly represent taxpayers. CPAs can work as tax or financial advisors. The corresponding exams reflect these differences. The entire SEE covers information found only in the regulation section of the CPA exam. Even so, the SEE includes dozens of in-depth tax return topics.
The SEE includes three parts: individuals; business; and representation, practices, and procedures. Each section lasts 3.5 hours and contains 100 multiple-choice questions.
The CPA exam covers four sections: auditing and attestation (AUD), business environment and concepts (BEC), financial accounting and reporting (FAR), and regulation (REG). Each category lasts four hours and includes multiple-choice questions and task-based simulations. The BEC section also contains three written communication prompts.
Some international candidates qualify for the shorter international qualification examination instead of the standard CPA exam.
The more comprehensive CPA exam may appeal to people who have already taken higher education courses in accounting and are interested in accounting and tax preparation. Individuals solely interested in tax preparation, audits, representation, and tax planning may prefer the SEE. Candidates may even first pursue EA certification, then become a CPA later on.
How Can You Prepare for Certified Tax Preparer Exams?
As with any certification exam, the best way to prepare for the SEE or CPA exam is to start early. The National Society of Accountants recommends at least 50 study hours for each section of the SEE, totaling 150 hours. Prospective CPAs can apply the same rule to the CPA exam. However, the CPA exam covers more material over four sections, so test-takers may want to set aside 300-400 hours.
- Establish a Study Plan: Whether you wish to take the CPA exam or the SEE, both require weeks — if not months — of preparation. Create a study plan early to avoid cramming and stress. Establish short-term goals each week leading up to the exam and tailor the plan to fit your learning style. Consider incorporating flashcards, color-coded notes, prep books, explanation videos, or practice exams.
- Memorize the Tax Formulas: Tax calculations appear on both exams. Prepare to compute corporate charitable deductions, diluted earnings per share, goodwill, and ordinary income for S corporations. Spending time to memorize these formulas and calculations can save you time during the exam and make potentially challenging questions much easier.
- Stay Up-to-Date on Tax Laws: Tax laws constantly evolve, so candidates must review the most recent changes. Practicing with prior exams can prove highly beneficial, but ensure all the information still applies. Even an exam from one year prior can include some out-of-date questions.
- Review Blueprints and Sample Exams: Familiarize yourself with the content outline for each exam. These comprehensive blueprints show what to expect on the exam and can provide the basic structure for your study plan. Review sample exams to understand the wording and question types that often appear in each section
- Find a Mentor or Study Group: Help from a currently certified tax preparer can prove invaluable. They can answer questions, provide study tips, and help you know what to expect on the exam. CPA or SEE study groups also offer support and accountability throughout your preparation.
Practice Exams and Study Resources
- IRS Candidate Information Bulletin: Aspiring enrolled agents must take the SEE through Prometric, a testing service provider. To help individuals prepare, Prometric compiled this initial packet. It provides study materials, links to sample questions, content outlines, scoring explanations, and a test day checklist. Prometric also offers a SEE tutorial.
- AICPA Sample Tests: As a respected professional organization, the American Institute of Certified Public Accountants (AICPA) provides CPA practice exams. Individuals can review each section of the exam separately with the AUD, BEC, FAR, and REG sample tests. AICPA also provides recent exam blueprints so test-takers know what to expect.
- Test-Guide Practice Exams: Test-Guide offers an extensive list of CPA exam preparation materials. The site includes ten practice exam materials from various sources (including AICPA), four sets of flashcards, and additional free study options. Test-takers can also find the CPA exam outline, essential formulas, and registration information. Candidates for the SEE can find similar resources and practice exams.
What Is Needed to Maintain Tax Preparation Certification?
The EA certification lasts for three years. Enrolled agents can renew by filling out a form and paying the required fee. The IRS also requires EAs to take two hours of ethics and at least 14 hours of other credits each year. This totals 72 hours of continuing education per renewal cycle. EAs can pursue these credits through approved continuing education providers or the National Association of Enrolled Agents.
CPA license duration depends on the state but often lasts 1-3 years. Each state board generally requires continuing education hours, often including ethics courses. CPAs can join AICPA or their local state CPA association.
Frequently Asked Questions About Tax Certification
Which professional roles can also be tax preparers?Anyone with a PTIN can work as a tax preparer. Attorneys and certified public accountants automatically become tax preparers with unlimited representation rights upon receiving licensure from their state. Enrolled agents, licensed by the IRS, can also be tax preparers.
What credentials do you need to get a tax preparer license?The credentials for certified tax preparers vary. Licensed attorneys need no extra credentials. Individuals looking to work as tax professionals can either become a CPA or an enrolled agent. EAs only need to pass the SEE, while CPAs need to pass the Uniform CPA Examination and complete educational and professional requirements set by their state.
What is the difference between a CPA and a certified tax preparer?A CPA holds unlimited representation rights as a tax preparer. They can specialize in tax preparation or focus on financial advisory and accounting. Other certified tax preparers — like enrolled agents — focus exclusively on tax preparation. Both CPAs and EAs hold the same rights before the IRS, but their focuses may differ.
How many times can I take the tax certification exam?EA candidates can take any part of the exam four times in each testing window (typically May to February). Individuals can retake the CPA exam as many times as needed, but most states expect candidates to pass each section within 18 months.
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