Tax preparation is the process of preparing tax returns to be filed with the IRS, state, or both, depending on which returns need to be filed. Most often, tax returns are filed with both and depend on which state an individual or business is located. Most tax preparation for both individuals and businesses is done by a professional tax preparer for a reasonable fee.
Tax preparation may also be done by a licensed professional such as an attorney, certified public accountant (CPA), enrolled agent (EA), or by an unlicensed tax preparation business. Due to the fact that income tax laws in the United States are considered to be considerably complicated, under most scenarios, many taxpayers should seek outside assistance with tax preparation.
In some states, licensing requirements exist for anyone who is involved with tax preparation for a fee – in many cases, this pertains simply to the individual state’s filing requirements.
It wasn’t until 2011 that the IRS mandated the requirement for national registration of paid tax return preparers in the United States. Therefore, effective January 1, 2011, new rules regarding tax preparation require the registration of almost all paid federal tax return preparers. These new tax preparation rules require that some paid preparers pass a national tax law exam and undergo continuing education requirements. Persons who are classified as certified public accountants (CPAs), enrolled agents (EAs) or attorneys are required to register but are not required to take the tax preparation exam and are not subject to continuing education requirements. CPAs and attorneys are licensed on a state-by-state basis, and are subject to state-mandated continuing education requirements to maintain their licenses.
For purposes of the registration requirement for certain tax preparation, the IRS defines a “tax return preparer” as “an individual who, for compensation, prepares all or substantially all of a federal tax return or claim for refund.”
All tax return preparers, including those involved in tax preparation that are attorneys, certified public accountants, or enrolled agents, are required to have a practitioner tax identification number (PTIN). This rule is effective for preparation of any federal tax returns after December 31, 2010.
Beginning in mid-2011, tax return preparers (other than CPAs, attorneys, and enrolled agents and a few others) have generally been required to take and pass a tax preparation competency test to officially become a registered tax return preparer.
When to File
Generally speaking, January 30, 2013 is the first date the IRS will accept and process tax returns for the 2013 tax season. April 15, 2013 is the due date for most taxpayers to file their 2012 income tax returns. It’s important to start your tax preparation early!
If you do not complete your tax preparation on time or file your return by the due date, you may be subject to a failure-to-file penalty and interest. To avoid penalties and interest, it is recommended that you file for an extension by April 15.
If you are due a refund, but you did not file a tax return, you must file within three years from the date the return was originally due to obtain that refund.
All of the above are tax preparation solutions that Tax Help Hawaii is more than happy to assist you with. In fact, we have an entire team strictly devoted to tax preparation as their core function. So, if you have found yourself in a hardship, have back tax returns that have gone unfiled, or an IRS collection action has been initiated against you, rest assured we are here to help. Call today for your free consultation!