A tax accountant has different qualifications and levels of expertise than an income tax preparer. Both are qualified to assist individuals with preparing and filing their income tax returns. However, tax accountants are qualified to provide more long-term assistance to individuals and businesses. Certified Public Accountants have the autonomy to practice in the accounting field as well as prepare income taxes for compensation without being subjected to the same IRS guidelines for income tax preparers.
The IRS requires income tax preparers who prepare tax returns for a fee to pass an examination that establishes their competency level in preparing 1040 tax returns. Registered tax preparers are required to obtain a Preparer Tax Identification Number issued by the IRS. Certified Public Accountants have passed the CPA exam administered by the National Association of State Boards of Accountancy. CPAs are not required to pass the competency examination administered by the IRS, but are required to register with the IRS and obtain a Preparer Tax Identification Number if they prepare returns for a fee. CPAs may prepare tax returns for compensation and represent their clients in various tax matters. Accountants who are not CPAs must pass the competency examination to prepare taxes.
Income tax preparers must adhere to continuing education requirements to maintain the IRS authorization to prepare tax returns for a fee and renew their Preparer Tax Identification Number annually. They are required to complete 15 hours annually of continuing education courses in federal tax laws and ethics. Certified Public Accountants are not required to complete continuing education courses pursuant to IRS regulations regarding income tax preparers if they remain in good standing with their accounting licensing authorities. CPAs must only renew their Preparer Tax Identification Number annually, if they intend to prepare taxes for compensation.
Most tax accountants are Certified Public Accountants. Non-CPAs can prepare and compile financial statements, whereas CPAs can also assist their clients during IRS audits. In addition to preparing taxes, tax accountants assist individuals and businesses in financial planning and estate planning. Unlike CPAs, the knowledge level of income tax preparers is limited to their ability to provide their clients with advice regarding preparing and filing tax returns with the IRS.
Registered income tax preparers are either self-employed or work for tax preparation companies on a seasonal basis. During annual tax seasons, income tax preparers typically work full-time or part-time schedules.