Becoming a certified IRS tax preparer is a rewarding career path that allows you to help individuals and businesses navigate the often-complex world of taxes. Whether you aspire to work for a large firm, start your own practice, or simply assist friends and family, understanding the steps involved is crucial.
Ready to embark on this journey? Let's get started!
Step 1: Understand the Landscape of Tax Preparer Roles and Credentials
Before diving into the specifics of certification, it's vital to grasp the different types of tax preparers and the levels of authority they hold. This will help you determine the best path for your career goals.
Sub-heading 1.1: Uncredentialed Tax Preparers
These individuals can prepare tax returns for compensation, but they have limited representation rights before the IRS. This generally means they can only represent clients on returns they personally prepared and signed, and only before revenue agents, customer service representatives, or similar IRS employees during an audit. They cannot represent clients in appeals or tax court.
Sub-heading 1.2: Annual Filing Season Program (AFSP) Participants
The AFSP is a voluntary program for non-credentialed tax preparers. By completing specific continuing education requirements annually, participants receive an "Annual Filing Season Program - Record of Completion" from the IRS. This allows them to represent clients on returns they prepared and signed before revenue agents, customer service representatives, and similar IRS employees. They are also listed in the IRS's Directory of Federal Tax Return Preparers with Credentials and Select Qualifications, which can enhance their credibility with potential clients.
Sub-heading 1.3: Enrolled Agents (EAs)
Enrolled Agents are federally licensed tax professionals who have unlimited rights to practice before the IRS. This means they can represent any taxpayer (individuals, partnerships, corporations, estates, trusts) on any tax matter (audits, collections, appeals) before any office of the IRS. Becoming an EA requires passing a comprehensive three-part exam and meeting continuing education requirements. It is the highest credential the IRS awards to tax professionals who are not attorneys or Certified Public Accountants (CPAs).
QuickTip: Check if a section answers your question.
Sub-heading 1.4: Certified Public Accountants (CPAs) and Attorneys
CPAs and attorneys also have unlimited rights to practice before the IRS. However, their primary certifications are regulated at the state level and encompass a broader range of financial and legal services beyond just tax preparation. While many CPAs and attorneys do prepare taxes, their expertise often extends to auditing, financial planning, and various legal matters.
Consider your long-term aspirations. Do you want to specialize solely in tax, or do you envision a broader financial career? This initial reflection will guide your choices in the following steps.
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Step 2: Obtain Your Preparer Tax Identification Number (PTIN)
Regardless of your chosen path, if you intend to prepare federal tax returns for compensation, you must have a valid Preparer Tax Identification Number (PTIN). This is the absolute first and non-negotiable step for any paid tax preparer.
Sub-heading 2.1: Applying for Your PTIN
- Online Application: The easiest and fastest way to get your PTIN is by applying online through the IRS website. The process typically takes about 15 minutes. You'll need to create an e-Services account first if you don't already have one.
- Information Needed: Be prepared to provide personal information (name, address, date of birth), business information (if applicable), your Social Security Number (SSN), and details from a previous year's individual tax return for identity verification. If you have any professional certifications (like CPA or EA), you'll need to provide those details as well.
- Fee: There is a non-refundable fee associated with obtaining or renewing your PTIN, which is typically around $19.75 (as of current information).
- Paper Application: While less common and much slower (can take up to six weeks), you can also apply by mail using Form W-12, IRS Paid Preparer Tax Identification Number (PTIN) Application and Renewal.
Sub-heading 2.2: Annual Renewal
Your PTIN is not a one-time thing. It expires on December 31st of the calendar year for which it is issued. You must renew your PTIN annually to continue preparing returns for compensation. The renewal process is similar to the initial application.
Step 3: Decide on Your Level of "Certification" and Pursue It
This is where your initial self-assessment from Step 1 comes into play. Your next steps will depend on whether you want to be an AFSP participant, an Enrolled Agent, or if you already hold a CPA or attorney license.
Tip: Keep your attention on the main thread.
Sub-heading 3.1: For Annual Filing Season Program (AFSP) Participation
If you're an unenrolled preparer and want to gain limited representation rights and be listed in the IRS directory, the AFSP is your route.
- Continuing Education (CE): You must complete a specific number of continuing education hours annually by December 31st from an IRS-approved CE provider.
- For most unenrolled preparers, this means 18 hours of CE, which includes:
- 6 hours of an Annual Federal Tax Refresher (AFTR) course with a mandatory test. You must score 70% or better to receive credit.
- 10 hours of federal tax law topics.
- 2 hours of ethics.
- Note: Certain preparers (like those who passed the old Registered Tax Return Preparer exam or those licensed by a state after passing a federal tax exam) may be exempt from the AFTR course and only need 15 hours of CE (10 hours federal tax law, 3 hours federal tax law updates, 2 hours ethics).
- For most unenrolled preparers, this means 18 hours of CE, which includes:
- Consent to Circular 230: You must also agree to adhere to the obligations outlined in Treasury Department Circular 230, which governs the practice of tax professionals before the IRS.
Sub-heading 3.2: For Enrolled Agent (EA) Certification
Becoming an Enrolled Agent is a significant step that offers the highest level of IRS-specific tax credentialing.
- Pass the Special Enrollment Examination (SEE): This is a rigorous, three-part exam administered by Prometric. You must pass all three parts within a three-year period. The parts cover:
- Individuals: Focuses on individual income tax returns.
- Businesses: Covers various business entities like corporations, partnerships, and trusts.
- Representation, Practices, and Procedures: Deals with IRS practices, ethical considerations, and representation rights.
- Suitability Check: After passing the SEE, you'll undergo a suitability check by the IRS. This may include a credit check, a tax compliance check, and a criminal background check, as well as a check for prior non-compliance with IRS e-file requirements.
- Continuing Education: Once certified, EAs must complete 72 hours of continuing education every three years, with a minimum of 16 hours annually, including 2 hours of ethics. This ensures EAs stay current with tax laws and regulations.
- Study Resources: Many companies offer comprehensive EA exam review courses. Invest in quality materials to prepare for this challenging exam.
Sub-heading 3.3: For CPAs and Attorneys
If you are already a licensed CPA or attorney, you generally have unlimited practice rights before the IRS without additional IRS-specific certification (beyond your PTIN). However, you must:
- Maintain Your License: Keep your state CPA license or bar membership active and in good standing.
- Meet Your Profession's CE Requirements: Fulfill the continuing education requirements for your respective profession, which typically include tax-related hours.
- Obtain a PTIN: As mentioned, you still need a PTIN if you prepare federal tax returns for compensation.
Step 4: Obtain an Electronic Filing Identification Number (EFIN)
If you plan to file tax returns electronically on behalf of your clients (which is highly recommended and often required if you prepare more than 10 returns annually), you'll need an Electronic Filing Identification Number (EFIN).
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Sub-heading 4.1: Applying for Your EFIN
- IRS e-Services Account: You'll need to sign in or create an IRS e-Services account.
- Submit Application: Complete and submit the authorized e-file provider application online.
- Information Required: Provide identification information for your firm and details about each "Principal" and "Responsible Official" in your organization. If you are a return preparer, you'll select "Electronic Return Originator" (ERO) as your e-file provider option.
- Fingerprinting (if applicable): If the principal or responsible official is not already a certified or licensed professional (like a CPA, attorney, or EA), they will need to schedule an appointment with an IRS-authorized vendor for fingerprinting.
- Suitability Check: The IRS will conduct a suitability check on your firm and the individuals listed on your application. This can include a credit check, tax compliance check, criminal background check, and a review of any prior non-compliance with IRS e-file requirements.
- Processing Time: Be patient! It can take up to 45 days for the IRS to approve an EFIN application.
Once approved, you'll receive an acceptance letter with your EFIN. This number does not expire but is tied to your authorized e-file provider status.
Tip: Compare what you read here with other sources.
Step 5: Acquire Tax Preparation Software
To efficiently prepare and e-file returns, you'll need professional tax preparation software. This is a critical investment for your practice.
Sub-heading 5.1: Choosing the Right Software
- Features: Look for software that offers comprehensive form libraries, easy data entry, strong error-checking capabilities, and robust reporting.
- E-filing Integration: Ensure the software seamlessly integrates with the IRS e-file system.
- Client Management: Many professional tax software solutions also include features for client management, document storage, and billing.
- Support and Updates: Choose a provider with reliable customer support and regular updates to reflect changes in tax law.
- Popular Options: Research software like ProSeries, Lacerte, UltraTax CS, or TaxAct Professional. Consider cloud-based options for flexibility.
Step 6: Set Up Your Business (if starting your own practice)
If your goal is to establish your own tax preparation business, there are additional steps to consider beyond just IRS certification.
Sub-heading 6.1: Business Structure and Registration
- Choose a Legal Structure: Decide on a legal structure (e.g., Sole Proprietorship, LLC, S-Corp) based on your liability preferences and tax implications.
- Register Your Business Name: Register your business name with your state.
- Obtain an EIN: If you plan to hire employees or operate as a corporation or partnership, you'll need an Employer Identification Number (EIN) from the IRS.
Sub-heading 6.2: State-Specific Requirements
- Research State Regulations: Some states have their own licensing or registration requirements for tax preparers. Do not skip this step! Check with your state's revenue department or board of accountancy. For example, some states may require specific bonds or additional education.
Sub-heading 6.3: Professional Development and Marketing
- Continuous Learning: Tax laws change constantly. Commit to ongoing education beyond the minimum requirements. Attend webinars, read tax publications, and join professional organizations.
- Networking: Connect with other tax professionals, accountants, and financial advisors.
- Marketing: Develop a business plan and marketing strategy to attract clients. This could include building a professional website, utilizing social media, and leveraging local networking events.
- Client Data Security: Implement robust measures to protect sensitive client data, as this is a paramount responsibility for tax preparers.
This comprehensive approach will not only ensure you are certified but also equip you to build a successful and compliant tax preparation career.
10 Related FAQ Questions
How to obtain a PTIN?
To obtain a PTIN, visit the IRS website at IRS.gov/taxpros, select "Renew or Register," and follow the prompts to create an account and complete the online application. A non-refundable fee applies.
How to become an Enrolled Agent (EA)?
To become an Enrolled Agent, you must pass all three parts of the IRS Special Enrollment Examination (SEE) within a three-year window, complete a suitability check, and then fulfill annual continuing education requirements (72 hours every three years, with a minimum of 16 hours annually including 2 hours of ethics).
Tip: The details are worth a second look.
How to participate in the Annual Filing Season Program (AFSP)?
To participate in the AFSP, unenrolled tax preparers must complete 18 hours of IRS-approved continuing education annually by December 31st (including a 6-hour Annual Federal Tax Refresher course with a test, 10 hours of federal tax law, and 2 hours of ethics) and consent to Circular 230 obligations.
How to get an Electronic Filing Identification Number (EFIN)?
To get an EFIN, apply online through your IRS e-Services account. You'll provide firm and official information, and if not already a licensed professional, you'll need to undergo fingerprinting and pass an IRS suitability check. The process can take up to 45 days.
How to maintain my tax preparer credentials?
Maintaining credentials primarily involves renewing your PTIN annually and fulfilling specific continuing education (CE) requirements based on your certification (e.g., 18 hours for AFSP, 72 hours every three years for EAs, and your state board's requirements for CPAs/attorneys).
How to choose the right tax preparation software?
When choosing tax preparation software, consider factors such as the comprehensiveness of forms, ease of use, e-filing integration, client management features, customer support, and regular updates to comply with changing tax laws.
How to represent clients before the IRS as an unenrolled preparer?
Unenrolled preparers, particularly AFSP participants, can represent clients only before revenue agents, customer service representatives, or similar IRS employees during an audit, and only for returns they personally prepared and signed. They cannot represent clients in appeals or tax court.
How to find IRS-approved continuing education providers?
You can find IRS-approved continuing education providers on the IRS website. The IRS maintains a list of qualified providers for the Annual Filing Season Program (AFSP) and other credentials.
How to handle state-specific tax preparer requirements?
Research your specific state's Department of Revenue or Board of Accountancy website to identify any additional licensing, registration, bonding, or continuing education requirements for tax preparers in your state.
How to start my own tax preparation business?
To start your own tax preparation business, obtain your PTIN and EFIN, choose a legal business structure, register your business name, acquire professional tax software, and develop a marketing strategy to attract clients. Always ensure compliance with all federal and state regulations.
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