How does a tax preparer get paid?
Tax preparers are paid in a couple of different ways, depending on the client, type of taxes, and the tax preparer. Some tax preparers charge a flat fee, with additional flat charges for each additional form over the standard return. Others may charge an hourly rate based on the complexity of the taxes, the work they do, and whether the taxes are personal or corporate. Some tax preparers work as independent contractors and set their own rates, while others work for tax preparation companies or agencies and are regular employees. They can also work directly for the companies for which they are doing taxes.
Hiring a Paid Preparer
Most tax return preparers provide outstanding service. The IRS urges taxpayers to check their tax return preparer’s qualifications and history. Taxpayers should ask about service fees before they give their records to a preparer.
Taxpayers should not use a preparer who will e-file a return using only a pay stub instead of a Form W-2. Taxpayers should review the return and ask questions before signing. A taxpayer is responsible for the information on the tax return, no matter who prepared it.
Types of Paid Preparers
Different types of preparers have differing skills, education and expertise. Another important difference is a preparer’s ability to represent taxpayers before the Internal Revenue Service.
There are two types of representation rights, also known as practice rights: unlimited and limited representation.
Preparers with unlimited representation rights can represent clients on any matters. That includes audits, payment issues, collection issues and appeals. Those with limited representation rights can only represent clients whose returns they prepared and signed. They can only represent a taxpayer when dealing with revenue agents, customer service representatives, and similar IRS employees, including the Taxpayer Advocate Service.
Credentialed Return Preparers
Tax return preparers with unlimited representation rights include these professionals:
- Attorneys are licensed by state courts, the District of Columbia or their designees, such as the state bar. They have a law degree and passed a bar exam. Attorneys generally have continuing education and professional character standards. Attorneys may offer a range of services. Some attorneys specialize in tax preparation and planning.
- Certified Public Accountants. CPAs are licensed by state boards of accountancy, the District of Columbia, and U.S. territories. CPAs must pass the Uniform CPA Examination. They completed a study in accounting at a college or university and met experience and good character requirements established by their board of accountancy. To maintain an active CPA license, CPAs must comply with ethical and continuing education requirements. CPAs may offer a range of services. Some CPAs specialize in tax preparation and planning.
- Enrolled Agents. The IRS licenses enrolled agents. They’re subject to a suitability check and have passed a three-part Special Enrollment Exam. The comprehensive exam covers federal tax planning, representation and tax preparation for individuals and businesses. They must complete 72 hours of continuing education every three years. Learn more about the Enrolled Agent Program.
What does a tax preparer do?
Tax preparers are finance professionals who prepare and file individuals’ and businesses’ tax returns. They meet with clients to gather their tax information, such as marital status, number of children and other dependents, salary and other taxable income among other information required by the Internal Revenue Service (IRS). Then they fill out, sign and file all the appropriate forms according to federal and state tax codes. Since tax returns can range from simple to extremely complex, many people and companies hire tax preparers to do their taxes correctly and make sure they get the greatest tax refund for their situation.
Tax preparer responsibilities can include:
- Performing administrative duties, such as answering phone calls and setting up appointments
- Gathering and organizing personal and confidential paperwork on clients’ income, expenses, allowances and more
- Understanding adjustments, credits and deductions, as well as federal and state tax laws
- Doing math equations and double-checking calculations and data entries to make sure they are correct
- Working with financial and accounting software
- Providing clients with future tax planning advice and recommendations
- Processing billing for time spent doing clients’ tax returns
Salary for Tax Preparers
Many small businesses and individuals seek help in filing their tax returns. The professionals who prepare and file their taxes are tax preparers. The complexity of tax forms that they prepare ranges from simple to extremely complex, and may include reviewing the work of other tax preparers to ensure accuracy. As professionals, their goal is to ensure that a client pays the minimum tax required and receives the largest tax return possible, where applicable. Individuals in this occupation must stay current regarding tax code changes and available deductions and benefits. Familiarity with tax law, codes and financial software, as well as a high school diploma or its equivalent, are requirements for this occupation.
A Tax Preparer will usually earn wages on a scale from 24000 to 36000 based on levels of tenure. Tax Preparers will most likely earn a compensation of Thirty Seven Thousand One Hundred dollars every year.
Tax Preparers can make the most money in Massachusetts, which has average pay levels of approximating $60440. Professionals that work in these jobs are compensated highest in Finance and Insurance, where they can get salary pay of $48940.
What is the Pay by Experience Level for Tax Preparers?
An entry-level Tax Preparer with less than 1 year experience can expect to earn an average total compensation (includes tips, bonus, and overtime pay) of $11.19 based on 155 salaries. An early career Tax Preparer with 1-4 years of experience earns an average total compensation of $12.21 based on 624 salaries. A mid-career Tax Preparer with 5-9 years of experience earns an average total compensation of $14.51 based on 286 salaries. An experienced Tax Preparer with 10-19 years of experience earns an average total compensation of $15.47 based on 267 salaries. In their late career (20 years and higher), employees earn an average total compensation of $20.