tax-preparation

Learn What is Tax Preparation and What Do Tax Preparers Do?

All That You Need to Know About Tax Preparation

Have you ever questioned what a tax preparer does? Or What exactly is tax preparation?
Tax preparers compute, file, and offer assistance with simple and complex tax returns for individuals and companies, called tax preparation. The primary objective of these experts is to maximize tax returns for clients while abiding by all relevant rules.
Tax preparers can assist with tax return preparation as well as accounting, bookkeeping, and payroll services. Many tax preparers are employed full-time, part-time, or independently at private businesses or accounting firms. Although most of these specialists are employed year-round, tax season is often their busiest time.
Customer service, financial analysis, data input, and data management abilities are frequently used by tax preparers. People who are good at problem-solving, communication, and critical thinking may excel in this position.
Read on to know more about tax preparation and how can a tax preparer help you with your taxes!

Who is a Tax Preparer?

An individual who prepares, computes, and files income tax returns on behalf of individuals and businesses is known as a tax preparer. 
There are various different categories of tax preparers, some of whom have certifications issued by independent organizations while others do not. You can achieve the greatest possible tax results by being aware of the various tax preparer types and credentials.

What Includes Tax Preparation?

Tax preparation involved multiple jobs performed by tax preparers.
For their clients, tax preparers complete and submit tax forms. A tax preparer can analyze all of a client’s personal information, including Social Security numbers, income statements, and personal and business costs, to identify which expenses and situations may result in tax deductions or credits. This requires a good understanding of tax law.
A tax preparer can also advise clients on the best course of action to take to lower their tax liability in the upcoming year based on the outcomes of the calculation of their return.

Credentialed vs Non-credentialed Tax Preparers

The two main types of tax preparers are explained below.

Credentialed Tax Preparers

Numerous tax preparers are licensed experts that work throughout the year, mostly on accounting and tax-related chores. Tax preparers with credentials include:
  • Certified Public Accounts (CPAs)
  • Enrolled Agents (EAs)
  • Tax Attorneys
  The Internal Revenue Service (IRS) or a state board grants credentials to all three different categories of tax preparers.  
  • State boards grant qualifications to CPAs.
  • The IRS issues credentials to EAs.
  • State bar bodies issue licenses to tax attorneys.

Non-credentialed Tax Preparers

Non-credentialed preparers are people who do tax preparation without holding a credential from a third-party organization. Non-credentialed tax professionals may be self-taught or have acquired training from a tax preparation store where they work seasonally rather than fulfilling the requirements of a third-party issuing body.

Tax preparers without credentials include:

  • Seasonal tax store employees
  • Volunteer Income Tax Assistance (VITA) program volunteers
  • Tax accountants not Certified by the American Institute of CPAs (AICPA)
  • Annual Filing Season Program participants

Tax preparers who work or volunteer for these companies and organizations may have credentials and file returns, although they are typically not compelled to. Many unlicensed tax preparers only offer tax preparation assistance for a few months of the year during tax season, unlike CPAs, EAs, and tax attorneys.

Types of Credentialed Tax Preparers

There are multiple types of credentialed tax prepares that you could use. Here are a few of them:

Certified Public Accountant (CPA)

As the name implies, a CPA has received certification from a state or governmental jurisdiction stating that they have acquired the necessary competence level in accounting and tax preparation areas, such as,
  • Maintaining financial records
  • Certifying financial statements
  • Conducting audits
CPAs are permitted to represent their clients before the IRS in all circumstances, including:
  • Tax audits
  • Payment and collection issues
  • Appeals

Enrolled Agent (EA)

An EA is a person who has been granted authorization by the IRS to represent clients in any case before the IRS. A person must either pass the IRS’ Special Enrollment Examination or, if they were previously employed by the IRS, meet certain work experience requirements in order to become an EA.

Tax Attorney

A lawyer with expertise in tax law is known as a tax attorney.
A tax attorney often needs to complete both a college education and a legal education. the state bar examination, and obtain a state license, which frequently requires meeting specific moral requirements. Moreover, throughout their professions, they continue their education.
Tax attorneys assist clients with the legal ramifications of their taxes using their extensive understanding of business and tax legislation. They are qualified to represent their clients before the IRS in all tax-related situations and can also prepare their customers’ tax returns.

Tax Preparation Areas of Expertise

A tax preparer’s primary responsibility is to finish tax returns, but what else does a tax preparer do? What else comprises tax preparation?
Other aspects of the job change depending on the role and industry. Accounting, bookkeeping, and payroll services are just a few of the areas in which tax preparers might specialize to meet the needs of particular clients.

Tax Return

For their clients, tax preparers organize, fill out, and explain various tax-related forms. They also prepare tax returns for these clients. Tax preparers work full-time, part-time, and seasonally for accounting firms, tax corporations, and private companies.

Accounting

Tax accountants also track tax payments and refunds on behalf of customers in the public and private sectors in addition to drafting and filing tax returns.
Tax accountants are well-versed in all relevant tax laws and rules. They have the necessary bookkeeping and accounting experience. While senior-level accountants handle more challenging jobs including representing clients in tax disputes and analyzing tax returns, entry-level tax accountants are responsible for filing individual and corporate tax returns.

Bookkeeping

Many tax preparers also serve as bookkeepers, who are experts in providing reliable data and statistics about a company’s financial health. Small and large organizations can benefit from the tracking of financial transactions, internal record-keeping, and assurance of consistency between company finances and bank statements provided by bookkeepers.

Payroll Accountancy

Accountants who compile, produce, and maintain payroll documentation are known as payroll accountants. Usually, they are employed by small or medium-sized companies. Accountants who handle payroll make sure workers are paid on schedule. Commissions, benefits, and other financial accounts are also managed by them.
Is this all too much to understand? Don’t worry!
Tax preparation is not an easy thing to do! So, you can hire a tax preparer or a tax preparation service to help you with your tax fillings and returns.