FS-2018-5, March 2018
More than 83 million taxpayers paid someone to prepare their federal tax return in 2017. Generally, anyone who gets paid to prepare or help prepare a federal tax return must have a Preparer Tax Identification Number (PTIN). They must sign in the paid preparer's area of the return and give the taxpayer a copy of the return. Anyone who prepares and files 11 or more individual tax returns a year must file electronically.
Hiring a Paid Preparer
Most tax return preparers provide outstanding service. The IRS urges taxpayers to check their tax return preparer’s qualifications and history. Taxpayers should ask about service fees before they give their records to a preparer.
Taxpayers should not use a preparer who will e-file a return using only a pay stub instead of a Form W-2. Taxpayers should review the return and ask questions before signing. A taxpayer is responsible for the information on the tax return, no matter who prepared it.
Types of Paid Preparers
Different types of preparers have differing skills, education and expertise. Another important difference is a preparer’s ability to represent taxpayers before the Internal Revenue Service.
There are two types of representation rights, also known as practice rights: unlimited and limited representation.
Preparers with unlimited representation rights can represent clients on any matters. That includes audits, payment issues, collection issues and appeals. Those with limited representation rights can only represent clients whose returns they prepared and signed. They can only represent a taxpayer when dealing with revenue agents, customer service representatives, and similar IRS employees, including the Taxpayer Advocate Service.
Credentialed Return Preparers
Tax return preparers with unlimited representation rights include these professionals:
- Attorneys. Attorneys are licensed by state courts, the District of Columbia or their designees, such as the state bar. They have a law degree and passed a bar exam. Attorneys generally have continuing education and professional character standards. Attorneys may offer a range of services. Some attorneys specialize in tax preparation and planning.
- Certified Public Accountants. CPAs are licensed by state boards of accountancy, the District of Columbia, and U.S. territories. CPAs must pass the Uniform CPA Examination. They completed a study in accounting at a college or university and met experience and good character requirements established by their board of accountancy. To maintain an active CPA license, CPAs must comply with ethical and continuing education requirements. CPAs may offer a range of services. Some CPAs specialize in tax preparation and planning.
- Enrolled Agents. The IRS licenses enrolled agents. They’re subject to a suitability check and have passed a three-part Special Enrollment Exam. The comprehensive exam covers federal tax planning, representation and tax preparation for individuals and businesses. They must complete 72 hours of continuing education every three years. Learn more about the Enrolled Agent Program.
Annual Filing Season Program
The IRS recognizes the efforts of non-credentialed return preparers who aspire to a higher level of professionalism. To that end, the IRS issues an Annual Filing Season Program Record of Completion to return preparers who obtain 18 hours of continuing education for a specific tax year. Those hours include a six-hour federal tax law refresher course.
Return preparers who participate in the Annual Filing Season Program have limited representation rights. They can only represent clients whose returns they prepared and signed. They can only represent a client before revenue agents, customer service representatives and similar IRS employees, including the Taxpayer Advocate Service. They must participate in the Annual Filing Season Program in both the year they prepare the client’s return and the year they represent that client.
If a non-credentialed return preparer doesn’t participate in the Annual Filing Season Program, they may prepare and file federal tax returns, but they can’t represent clients before the IRS.
Researching Tax Return Preparers
The IRS has a searchable, sortable public directory on IRS.gov that taxpayers can use to research tax return preparers by name, zip code or credential. The IRS Directory of Federal Tax Return Preparers with Credentials and Select Qualifications includes PTIN holders who are:
- Credentialed preparers,
- Annual Filing Season Program participants,
- Enrolled actuaries and
- Enrolled retirement plan agents.
Taxpayers can research a specific tax professional’s credentials or qualifications. The listings are not an endorsement from the IRS.
Make a Complaint about a Tax Return Preparer
Most paid preparers are professional, honest and trustworthy. The IRS is committed to investigating those who act improperly. Taxpayers can Make a Complaint About a Tax Return Preparer for misconduct, such as:
- Embezzling a taxpayer’s refund,
- Altering tax return documents,
- Filing a return without a taxpayer’s consent,
- Creating or omitting income to create a larger refund,
- Creating false exemptions or dependents to create a larger refund,
- Creating false expenses, deductions or credits to create a larger refund and
- Using an incorrect filing status to create a larger refund.