Guide to Different Types of Tax Services

The four primary categories of tax experts are covered in this guide, along with their functions in handling complicated tax situations. It highlights how crucial it is to select the best tax expert for tricky instances like company transactions, cryptocurrency, and stock incentives.

A qualified tax counselor is a smart choice for anyone with complex or unexpected tax situations since they provide proactive, continuous assistance.

 

Which four categories of tax specialists are there?

There are four primary categories to take into account when choosing a tax professional:

1.       Certified Public Accountant (CPA)

2.       Enrolled Agent (EA)

3.       Tax Attorney

4.       Non-credential Tax Professional

Before being able to offer particular services, each type needs to complete unique coursework and training, which we'll discuss below.

Certified Public Accountant (CPA)

A tax practitioner who satisfies state requirements to bear the designation is known as a Certified Public Accountant or CPA.

Education and Employment

A professional who completes the Uniform Certified Public Accountant Examination has completed 150 hours of education and holds a bachelor's degree is known as a Certified Public Accountant (CPA). To guarantee moral behavior, they often pass an ethics exam and receive their license from state boards of accountancy.

State requirements for continuous education must also be met by CPAs. They provide services such as tax planning, preparation, auditing, and financial strategy in a variety of situations, including public accounting firms, corporate finance departments, and financial companies.

When a CPA should be consulted

The IRS grants CPAs full representation powers, so even if they did not prepare the tax return, they can represent clients on any tax subject, including audits and appeals.

CPAs offer constant comprehensive guidance, such as:

•        Planning for taxes in diverse scenarios including multiple streams of income, business dealings, and investments

•        Tax guidance for stock option and RSU equity compensation transactions

•        Financial, tax, and business strategy advice to minimize a company's tax burden

•        Support for expected taxes due on income from self-employment

•        Estate planning to avoid tax consequences and support family objectives

Enrolled Agent (EA)

An IRS-granted credential attesting to an individual's expertise in federal tax affairs is held by an enrolled agent (EA).

Education and Employment

The IRS's Special Enrollment Examination (SEE), which covers tax preparation, client representation, and practice, must be passed to become an Enrolled Agent (EA). Every three years, they have to finish 72 hours of continuing education, which includes ethics training.

The leading professional organization for enrolled agents (EAs), providing information and advocacy, is the National Association of Enrolled Agents (NAEA). EAs can collaborate with a wide range of companies, such as banks, accounting firms, legal or investment firms, and the IRS.

When an EA should be consulted

EAs are qualified to represent clients in audits, collections, and appeals since the IRS has granted them unlimited representation powers as tax specialists.

EAs are taught to offer a wide range of services, such as:

•        Preparing, advising, and filing taxes for people and corporations in complicated situations

•        Representation and settlement services before the IRS for audits, unpaid taxes, or penalties

•        Estate and trust tax planning and preparation

Tax Attorney

After passing the bar exam in their state of practice and earning their law degree, a tax attorney is a specialist in tax law.

Education and Employment

Tax attorneys are professionals who are members of state and national bar associations such as the American Bar Association (ABA). They usually pursue an optional LLM degree in taxation.

They are in charge of handling legal tax concerns and disagreements and thorough tax planning and preparation. They work for corporate legal departments, law firms, or manage their businesses.

When a Tax Attorney should be consulted

The IRS grants tax attorneys broad advocacy benefits, just like it does for CPAs and EAs.

Since they offer extensive guidance, tax attorneys are a suitable choice for clients who require:

•        The necessity of attorney-client privilege and possible representation before the US Tax Court

•        Guidance regarding the choice of business structure (LLC, C Corporation, S Corporation, etc.)

•        Assistance with drafting wills, trusts, and estate plans to maximize tax benefits

•        Lawful methods to reduce corporate or personal tax obligations related to significant transactions, like asset sales or mergers and acquisitions

•        Guidance on international tax legislation, such as foreign tax credits or international incorporation

They are a fantastic choice for clients who want a thorough understanding of legal standards and regulation details because of their education and training.

Non-credentialed Tax Preparer

While the backgrounds and levels of experience of non-credentialed tax preparers vary significantly, they do not possess the specialized training and authorization of credentialed tax professionals.

Education and Employment

To legally file federal tax returns, non-credentialed tax preparers must get a Preparer Tax Identification Number (PTIN) from the IRS, even though they do not have formal credentials from CPAs, EAs, or Tax Attorneys.

They might work for tax preparation companies or on their own, occasionally on a seasonal basis. They might also be employed by the IRS's Volunteer Income Tax Assistance program, which, through its partner groups, provides free tax preparation assistance to underprivileged people.

When a Non-credentialed Tax preparer should be consulted

They are not given unlimited rights of representation by the IRS, contrary to CPAs, EAs, and tax lawyers.

Generally, Non-credentialed tax preparers provide:

•        Annually preparing basic taxes for clients with less complicated scenarios without maintaining a relationship

•        Broad guidelines for standard tax deductions and credits that apply to individual taxpayers

 

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Conclusion

Dealing with the tax system isn't always tough. Tax services provide the information, guidance, and support required to guarantee accurate, compliant, and perfect tax returns. Whether you're an individual or a business owner, using tax services can bring you financial peace of mind and possibly significant savings.