Types of Preparers
Enrolled Agents
An Enrolled Agent is a person who has earned the privilege of representing taxpayers before the Internal Revenue Service by either passing a three-part comprehensive IRS test covering individual and business tax returns or through experience as a former IRS employee. Enrolled Agent status is the highest credential the IRS awards. Individuals who obtain this elite status must adhere to ethical standards and complete 72 hours of continuing education courses every three years.
Enrolled agents, like attorneys and certified public accountants (CPAs), have unlimited practice rights. This means they are unrestricted as to which taxpayers they can represent, what types of tax matters they can handle, and which IRS offices they can represent clients before. [More information]
Certified Public Accountants (CPAs)
I would say CPAs are the preparers most commonly thought of when it comes to tax season. CPAs certainly have an excellent financial background and understanding of taxes. Tax preparation is one of the many areas that are covered in the CPA exam. There are many qualified CPAs, but not all CPAs focus on taxes. Many business owners use CPAs because they already are working with them to maintain their books. [More information]
Attorneys
Attorneys like CPAs have many specialties. A tax attorney is a good choice to prepare your taxes. Many people who use tax attorneys have complex tax situations. They likely file in multiple jurisdictions. Usually, these returns will be more expensive file and likely worth the added cost if you ever need to be represented in tax court. In many cases, this is probably more than you need. [More information]
California Tax Education Council registered tax preparer
California is one of the few states to have set requirements for professional tax preparers. State law requires anyone who prepares tax returns for a fee to be either Enrolled Agent (EA), Certified Public Accountant (CPA), an Attorney or CTEC registered tax preparer (CRTP). A CRTP must complete 60-hours (45 hours federal and 15 hours state) of qualifying tax education from a CTEC approved provider and hold a $5,000 tax preparer bond. [More information]
Self-Prepared
This one is pretty straightforward. You file your taxes. If you end up in an audit situation you can represent yourself or have an Enrolled Agent, CPA or Attorney represent you.
Unenrolled Preparers
WHAT IF THE TAX PREPARER IS NOT REGISTERED?
California law requires anyone who prepares tax returns for a fee within the State of California and is not an exempt preparer to register as a tax preparer with the California Tax Education Council (CTEC). Exempt preparers are California certified public accountants (CPAs), enrolled agents (EAs), and attorneys who are members of the State Bar of California.
As of January 1, 2005, the California Franchise Tax Board (FTB) has the authority to identify and penalize unregistered tax preparers.
“Failure to register as a tax preparer with the California Tax Education Coun
cil, as required by Section 22253 of the Business and Professions Code, unless it is shown that the failure was due to reasonable cause and not due to willful neglect.
(1) The amount of the penalty under this subdivision for the first failure to register is two thousand five hundred dollars ($2,500). This penalty shall be waived if proof of registration is provided to the Franchise Tax Board within 90 days from the date notice of the penalty is mailed to the tax preparer.
(2) The amount of the penalty under this subdivision for a failure to register, other than the first failure to register, is five thousand dollars ($5,000).”