Do you REALLY need a CPA?

A lot of changes are happening in 2024 and, as a result, I’ve been cutting back some on the tax preparation side of the business. After attending a tax planning training course and obtaining my coaching certification, I’m really trying to only engage new tax preparation clients if they are also in need of planning. I have had a couple of potential clients reach out asking for preparation services who weren’t interested in tax planning, and I’ve let them know they may not be a good fit for my business and should probably find a different preparer. But one client asked an interesting question: what is the difference between a tax preparer and a CPA?

A lot of people genuinely do not know that there is a difference between the two. You may have noticed in many of my posts, I am careful to use the term tax preparer and tax planner and not CPA. The fact of the matter is not every licensed CPA does tax preparation and you don’t need a CPA license to prepare taxes. Actually, you only need a CPA license to perform an audit and you only need a preparer tax identification number (PTIN) to be allowed to file returns with the IRS. You do usually need some kind of certification and a certain amount of continuing education credits in order to apply for a PTIN, but one of those qualifications is to become an enrolled agent.

An enrolled agent is someone who has passed a three-part comprehensive test covering individual and business tax returns. Enrolled agents, like CPAs and attorneys, 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.  In fact, some may argue that having an enrolled agent prepare your return is better than having a CPA do it because an Enrolled Agent is more likely to be focused and informed on tax issues, whereas CPAs must stay up to date on other accounting issues in order to maintain their license.

Now you’re probably like: Amber, you’re a CPA, why are you telling people to go somewhere else for tax services? Well, you may or not be aware of it, but there is a real shortage of CPAs right now. 70% of CPAs are supposed to retire in the next few years and there are not nearly enough people getting licensed to be a CPA to replace those folks. On top of that, many licensed CPAs are leaving the field to pursue other careers, particularly in IT. They became accountants because it seems like a secure job, but then they weren’t able to handle the long hours and the client demands, not to mention the constant changes in tax laws. To put it into perspective: on average 12 licensed tax preparers are leaving the industry per week, either by retiring or changing careers, meanwhile last year, in the state of Pennsylvania, only 12 CPA licenses were issued during the course of the entire year.

I get calls almost every day from people who say they’ve called or emailed every CPA firm in the area and can’t get a response back. I think the truth is most of these firms are already so overwhelmed with clients that they don’t even have the time to return your call and let you know that you’re not the right client for them. If your tax situation isn’t that complicated, you are probably more suited to have an enrolled agent prepare your return. It’s a bit of irony that right when CPAs started leaving the field in droves, having a CPA prepare your taxes has become something of a status symbol. I’m not really sure why that’s happened, but I see posts on social media all the time (usually because someone has tagged me in it) from people saying they need a CPA for something. I read the post and quickly conclude that they don’t need a CPA at all, they just need a tax preparer.

That being said, I do want to caution you against anyone who is posing as a tax preparer who doesn’t actually have a PTIN. This has been a huge issue for the IRS where people who are not licensed preparers are setting up illegitimate firms and preparing returns with huge deductions that their clients are not qualified for and then taking a percentage of the refund. Make sure that the person filing your return signs it with a valid PTIN and that they file the return electronically. And if their pricing is based on the amount of the refund you receive, chances are, they are not a genuine tax preparer. You can search for licensed preparers here: https://irs.treasury.gov/rpo/rpo.jsf 

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