Guide to Tax Professionals, Part 1

The world of taxes in the United States is full of dizzying options. Who can taxpayers trust with their money? Who should they pick for various different tax needs? This series will explore different types of tax professionals, including what they do, why a taxpayer might need them, and what to look for when searching for one. This first post in the series tackles the subject of who exactly prepares taxes for others. The IRS defines a “tax preparer” as “any person who prepares for compensation, or who employs one or more persons to prepare for compensation, all or a substantial portion of any return of tax or any claim for refund of tax under the Internal Revenue Code”.[1]

Preparers include accountants, attorneys, and others - anyone who prepares taxes for money, except for a short list of applications and other miscellaneous IRS forms. They all have (or should have) one thing in common: they have a preparer tax identification number (PTIN) issued by the IRS.

Anyone who makes determinations that affect tax liability needs a PTIN. When preparers complete taxes for other people, their PTIN must be listed on returns in the "Paid Preparer" section. Bookkeepers or other workers who do not actually prepare returns but merely gather information that is then used by a preparer do not need a PTIN.[2]

In addition to needing a PTIN, specific state laws and regulations may apply to tax preparers who prepare state taxes. Some states actually provide a public registry of certified tax preparers who must meet certain qualifications to be included. Other federal laws apply as well.

However, the bar is low to be a tax preparer. Promises of “loopholes” or hidden deductions may not be all they seem. While the tax laws are complicated, most of the deductions for which taxpayers are eligible are well-known. Seek out a tax preparer who is prepared - to collect tax information and to ask about income and expenses, and not to find supposed loopholes that could catch the IRS’s attention and trigger an audit.

— By Julia Damron, Esq., Barnes Law

Julia Damron is an associate attorney with Barnes Law, licensed to practice law in California.

The opinions expressed are those of the author and do not necessarily reflect the views of the firm, its clients, or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

[1] 26 C.F.R. § 301.7701-15(a).

[2] See generally “Frequently Asked Questions: Do I Need a PTIN?”, Internal Revenue Service, https://www.irs.gov/tax-professionals/frequently-asked-questions-do-i-need-a-ptin (last updated Oct. 30, 2015).