There are times in life when you want to go it alone, and there are those pesky times when you NEED an expert. Sure, you could try to rewire your entire home by yourself. But, if you’re not into being electrocuted on a constant basis, you’ll need an actual electrician. A real one, not your neighbors, cousins, best friend’s, co-worker’s unemployed baby daddy whose only claim to fame is that time he pressed the reset button on the bathroom outlet after she shorted it out while blowdrying her hair for an hour straight.

Since taxes fall onto that odd category of “boring yet terrifying” someone needs to give the taxpayer a breakdown of how to know when you need to move up the ladder of tax professional to find someone suitable to take care of the tax issues our fellow taxpayers find themselves confronting.

When it comes to taxes, sometimes its not easy to know when its time to call an expert in, and in some cases, what type of expert you need to call. Since taxes fall onto that odd category of “boring yet terrifying” someone needs to give the taxpayer a breakdown of how to know when you need to move up the ladder of tax professional to find someone suitable to take care of the tax issues our fellow taxpayers find themselves confronting.

For our purposes, we’re going to use levels to indicate which of the various types of tax professionals we are discussing. Level one will be your average tax preparer that you can find at your local Liberty Tax, or Jackson Hewitt. These professionals know how to enter the correct information into the right boxes, they have a basic understanding of tax laws, possess an understanding of any new tax law updates, and can usually be counted on to handle some itemized deductions. This level of tax professional can take care of the average joe, families with w-2 jobs, and mortgage interest, and perhaps even some self employed income. If you have any serious issues or need to file more than the past 2 to 3 years tax returns, this is not a smart choice, unless there is an enrolled agent or CPA onsite and available to take your case. 

Level Two tax professionals are the long time tax preparer with 5-10 years or more experience and have seen lots of clients over the years, and preparers with an associate in accounting. You may even find a good preparer with a certificate in taxation from various online schools that offer programs for Chartered Tax Professional, Accredited Tax Preparer, or even those who participate in the IRS Annual Filing Season Program. These are all folks who have taken the time to obtain education that renders them suitable for tax preparation for the masses. If you need help understanding an IRS letter you received, this level of tax pro can interpret it for you and give you a little guidance on who to call to address your concern. These pros are not authorized to speak to the irs on your behalf or pull your records, but they should be able to tell you what records you may need to pull.

That brings us to our Level three tax Professional: Enrolled Agents. You might be wondering what the heck an enrolled agent even is, and thats fine, because some of us don’t even know ourselves. An enrolled agent is a designation, not a certification, and it is a title for those of us who are authorized to practice before the IRS. This means if you have an IRS issue, an enrolled agent can obtain from you a power of attorney that allows them to speak on your behalf to the IRS, negotiate payment plans, appeal decisions, handle your audit, prepare your taxes, and give you advice on tax and entity selection and business structure for tax purposes. So, its like we’re a little bit lawyer, a tax accountant, a tax advisor, and your personal representative. Enrolled agents get their credentials in two ways; work for the IRS for five years, or take a 3 part test given by the IRS called the Special Enrollment Examination. The test is not easy by any stretch of the imagination, and many people fail at least one part before they finally pass all three parts, if they ever do.

Level Four tax professionals are the classic accountant you think of when you imagine a business tax professional: The CPA. Certified Public Accountants are elite tax pros with practice rights before the IRS, and the knowledge it takes to help you manage and keep track of your business affairs. These pros can certify your books, offer insight and predictions based on the data, run your reports and explain them to you, do your taxes, and offer insight to grow your business and plan out your tax strategy. Another Level Four pro is an EA with additional Certifications, such a Certified Taxpayer Representation Consultant, Certified Tax Resolution Specialist, and other certified designations.

Last, but certainly not least is the Tax Attorney, and in tax court cases, an enrolled agent who has passed the United States Tax Court Examination. For those who have found themselves in hot water with the criminal justice system, it’s time to find a tax attorney asap. If the issue involves Tax Court, the taxpayer can choose either or. You probably don’t want a tax attorney preparing your regular 1040 tax return, but, if it comes to the point where you’re being charged with tax evasion, lawyer up, please. 

The Choice is Yours

Who you choose to prepare your taxes, in the end, is up to you, and really should depend on your circumstances. Different designations of tax pros focus on different areas of taxation, and not just anybody can help you navigate the IRS. So, next tax season, do a little bit of research and try to make an informed choice when choosing the person who will help you with your tax issue.