An accountant is a professional who organizes, maintains, and checks the business records of an individual or organization. An accountant also prepares forms and reports for financial and tax purposes. Accountants in the U.S. can be of different types such as auditors, forensic accountants, public accountants, tax professionals, financial advisors, or consultants.
A tax professional is specifically trained in the field of taxation. The U.S. Department of Treasury empowers tax professionals to represent taxpayers before all administrative levels of the Internal Revenue Service (IRS) for audits, collections, and appeals.
Taxpayers of all types can benefit by hiring a tax professional. In most cases filling out one’s own tax form is not particularly difficult. Yet, it can be time consuming and laborious. There are many details to be remembered while filling a tax form and there is a chance that an individual may miss some of the tax deductions and tax credits. When a tax professional is preparing the tax returns, it can be ensured that the details are filled accurately. A true tax professional is a person who has in depth knowledge of tax law, and has experience with IRS audits and collection matters. A tax professional uses information provided by an individual to prepare or aid in preparation of federal, state and local tax returns.
The IRS authorizes only three credentials to represent any taxpayer at all levels of an audit or collections proceeding before the IRS: (1) an Enrolled Agent (EA); (ii) a Certified Public Accountant (CPA); or (iii) an attorney. Among them EA alone is a tax professional recognized by the U.S. federal government to represent taxpayers in dealings with the IRS. The EA credential is granted strictly based on extensive knowledge of tax law, but most EA’s also have accounting backgrounds. EA’s can represent an individual before the IRS in all matters including audits, collection of taxes and appeals from tax regulatory authorities.
These licensed tax professionals are required to have a certain level of tax knowledge and maintain continuing education standards. They also have a stake in providing correct tax information. The IRS imposes fines and penalties for tax preparation errors. EA’s are subject to professional discipline by their licensing bodies for ethics and other violations. Extreme violation of professional standards can result in revocation of EA’s license.
There are many unlicensed tax professionals who are extremely knowledgeable about tax matters. However, they lack proper credentials. Although many of the unlicensed tax professionals have been preparing taxes and giving tax advices for many years, it is difficult to be certain about the quality of their work. Any tax professional, licensed or not, can represent a taxpayer in basic IRS audit proceedings if he/she prepared the tax return that is being audited. However, the powers of unlicensed tax professionals are very limited. Most of them are not experienced enough to do a creditable presentation of the audit before the IRS. Hence, in complex tax audits, licensed tax professionals are preferred.