Choosing a return preparer or tax accountant can be a difficult decision. The stakes are high and credentials can be confusing:
Enrolled Agents (EA)
Enrolled Agents (EA) are all about tax. In order to become licensed, they must either pass a three-part examination covering all aspects of federal taxation or have worked for the IRS for at least five years in a position that required regular interpretation of the Tax Code and its regulations. They are subject to background investigation and must fulfill annual continued education in the field of taxation. "Continued education requirements are more stringent for members of ILSEA/NAEA than for non-member EA’s". Because Enrolled Agents are licensed by the United States Department of the Treasury, they can practice anywhere in the country and can represent taxpayers before the IRS for audits, collections and appeals. Many Enrolled Agents have the knowledge and qualifications to provide year-round accounting services to clients in addition to tax preparation, planning and representation.
Certified Public Accountants (CPA)
Certified Public Accountants (CPA) must pass an examination that covers a broad range of accounting issues including some taxation. They are subject to background investigation and must fulfill annual continued education requirements not limited to federal taxation. They can also represent taxpayers before the IRS but because they are licensed by their state board of accountancy, their practice is limited to the state where they are licensed. There are ILSEA/NAEA members who hold both the EA and CPA designation.
Certified Financial Planners (CFP)
Certified Financial Planners (CFP) specialize in financial planning. While their certification prepares them to advise clients in areas that require specific tax knowledge such as investments and trusts, they do not specialize in taxation and can not represent clients before the IRS. There are ILSEA/NAEA members who hold both the EA and CFP designation.
Attorneys (Esq) sometimes choose to specialize in tax law although no specific license is required in order for them to do so. Continued education requirements vary by jurisdiction with some states having none. Attorneys don’t usually prepare tax returns but choose to represent taxpayers before the IRS. There are attorneys who are also Enrolled Agents and hold membership in ILSEA/NAEA.
People who don't necessarily hold any of the above-mentioned designations may still prepare tax returns. But there is no minimum competency examination or continued education required for these non-licensed preparers.