When You Have A Health Problem, You See A Specialist, Why Not Do The Same With Your Taxes?
You’ve just had a heart attack. Do you go to your primary care doctor or the ER?
That’s a no-brainer… you go to the ER!
Ok, that example is a little Tax Agent Gold Coast over-dramatic, however, if you had heart problems you’re not going to take your primary care physician’s advice. Instead, you want a referral to someone who specializes in hearts, a cardiologist.
Why then when it comes to taxes do you just go to an accountant or CPA?
What does your accountant or CPA specialize in – Taxes? Probably not! In fact most CPAs handle a variety of tasks from auditing to book-keeping to records. While it sounds great to have one source for everything, it might not be the best option.
Go back to the doctor example. While a primary care giver is knowledgeable on the whole body and has the MD to prove it, the reality is that he or she might not be the best place to go for a heart problem or a kidney problem or whatever else might be ailing you.
Much like the weight an MD holds in the medical field, a CPA is a highly respected designation in accounting. These three letters do hold a lot of weight, however, they may not be the best certification for tax issues.
For one, the CPA exam is an “all inclusive” exam which covers all aspects of accounting. That said, taxes are only a small part of this exam. Much like any professional designation there is a certain amount of Continuing Professional Education(CPE) required to maintain this status.
Did you know that a CPA is never required to take another tax course for the rest of their lives?
In fact, their requirements to maintain CPA status can be on any accounting subject. Additionally, a CPA is only valid in the state the exam is taken(although there are reciprocity agreements that allow the possibility of being licensed in multiple states).
Now if your CPA is learning about bookkeeping, records and auditing, how much time can he or she really spend studying and learning taxes?
Again, your tax professional is your tax doctor – do you want the primary care provider who can give you generalizations or the specialist who can give you solutions?
If you’re looking for that specialist, you need a tax professional, namely an Enrolled Agent(EA).
An EA is your best bet for taxes not only because of the stringent CPE requirements(72hrs every 3yrs of only IRS approved tax courses), but because the exam and CPE are only tax related subjects and it is nationally recognized as a Federal designation. In fact, the exam itself is 3 parts:
To top it off the only other way to become an EA is to work for the IRS for at least 5 years. This means as an EA you have the tax knowledge of an IRS veteran!
Another breed of tax preparer is the bookkeeper with an associates’ degree who claims to be a “full service accountant”. This would be similar to a nurse without an RN posing as a doctor. While they might know a good deal about their field, they are by no means a specialist.
In addition, there are the “quacks” out there. These are the ones who until this year prepared taxes without even carrying the minimum IRS requirement, a Preparer’s Tax Identification Number or PTIN. Since the IRS made this a requirement for 2011 a lot of preparers went ahead and got a PTIN before 12/31/10 after which the IRS required a competency exam to obtain a PTIN. They then go around presenting themselves as “fully licensed”. While this is true and there are many tax professionals out there that are in the process of obtaining EA, CPA or other financial professional certifications, the reality is that there are still plenty of fly-by-nights or “quacks” who just get this as a technicality and know nothing about taxes.