Certified public accountant Leonard Mitchell of Pacific Northwest Tax Service Inc. in Portland works Friday with Deepika Fernando of Beaverton on her taxes.Correction appended.
A few years ago, Congressional investigators
that should've caused Oregonians to swell with pride. And irritation.
Oregon's tax returns, the investigators found, were more likely to be accurate than the rest of the country's -- about $250 more accurate as of 2001, the Government Accountability Office found.
Unfortunately, that meant 1.56 million individual Oregon taxpayers paid $390 million more in federal taxes than they would have if they lived elsewhere, the report said.
Oregon: We do our taxes right. And we pay for it.
Last year, I reviewed
. This year, I figured I'd help those wanting live person helping.
As you see, you're in good hands in Oregon.
Still, you can overpay for your service. Not everyone needs to pay a Certified Public Accountant by the hour to do their returns. You also can get a real
, regardless of their credential. I'll spend the next two columns helping you understand the different types of credentials and walking you through the process of picking the right practitioner for your situation.
And no, it won't be the one who'll reduce your tax liability.
"The reality is some employees of H&R Block know a lot about taxes," said April Gutierrez, founder of the
in Portland. "But you can't rely on the name of a company or the national stature of a company as an assurance that the individual you work with knows anything about taxes."
Most states allow just about anyone to prepare taxes. Oregon and California are the exceptions, with Oregon being the lone state that licenses tax preparers
The Internal Revenue Service is trying to change that, and it's using Oregon as a guide. As of 2011, it requires all tax preparers get an identification number and include it on any return they prepare.
That enables the IRS to track the quality of the preparer's return and drive poor preparers out of the business. In November,
"high risk" preparers would get letters noting "questionable traits" on their returns. Those with egregious error rates will enjoy an in-person visit.
By Dec. 31, 2013, an estimated 350,000 preparers will have to pass
, unless they already are CPAs, attorneys or what is known as an enrolled agent (explained below). They must meet continuing-education requirements and, eventually, pass a background check.
Oregonians already reap the benefits of such standardization, minus the background check. Since 1973, the state has licensed tax preparers, subjecting them to education, testing and experience requirements.
The state's two-tiered system also requires 30 hours of continuing education each year. Only CPAs and attorneys are excluded from licensing, and enrolled agents need only pass the state-specific portion of the exam.
California, by comparison, requires preparers register with the state, but education requirements are less extensive.
oversees 4,100 licensees in the state and can impose fines of up to $5,000 if they violate rules. You can
and/or
at the agency's website.
In 2008, facing a declining number of licensed preparers, the Oregon Board of Tax Practitioners made a controversial decision. It allowed test-takers to take the exam
.
LTPs, LTCs, EAs and CPAs! Here's how to keep all these tax preparer credentials straight:
Licensed Tax Preparer.
To obtain this license, wanna-be tax preparers must have a high school degree, complete 80 hours of classes and pass a 5-hour exam on Oregon and federal tax law. They can't work alone in an office their first year and can only provide tax advice or prepare returns while supervised by a licensed tax consultant, attorney or CPA.
. and other national tax firms offer classes for the test. So do many community colleges, as well as Gutierrez's tax school. The pass rate for the test is 65 percent, up from the 54 percent rate when the test was closed-book.
Licensed Tax Consultant.
Preparers can sit for this test once they've worked 780 hours over two tax seasons under a LTC (The requirement goes up to 1,100 hours July 1).
The test is much more difficult than the one for preparers, and it remains closed book. "The level of clarity that must be understood is much higher," said Gutierrez, who's also an LTC. "The specificity of the questions is so much more precise." The pass rate, as a result: 30 percent.
LTCs are responsible for the returns of any preparers they supervise.
Enrolled Agents.
EAs earn the right to represent individuals and businesses before the IRS. They must pass a written exam administered by the IRS or have spent time working for the agency.
The exam is difficult and covers more topics than the state's exam, Gutierrez says. It tests individual and business tax knowledge and rules about representing clients before the IRS. Those who pass must complete 72 hours of continuing education every three years to keep their status.
Certified Public Accountants.
In Oregon, 6,200 active CPAs answer to the state
. They hold a bachelor's degree, took accounting classes, passed a rigorous exam and worked under supervision of a more experienced CPA for two years. They also abide by an ethics code and take 80 hours of continuing education every two years.
Most CPAs specialize in taxes, but not all. At least 20 percent of practicing CPAs don't list taxes as their specialty, the Oregon Society of CPAs says. That said, CPAs also can represent clients before the IRS. And those with the PFS credential have completed extra training in personal financial planning.
So which of these designations is right for you? That depends. For example, only enrolled agents, enrolled actuaries, attorneys and CPAs can represent taxpayers before the IRS with few restrictions.
And how can you tell a good practitioner from a bad one? Next week's column will help you evaluate that.
Until then, rejoice that the IRS will soon hold preparers nationwide to higher standards. And help make sure residents of those other states pay their share, too.
"It's going to raise tax revenues and help close the tax gap," Gutierrez said.
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does not provide tax advice but welcomes questions about his column or blog. Reach him at 503-221-8359. Follow It's Only Money on
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The column reflects a correction published Feb. 2:
A Licensed Tax Consultant in Oregon who isn't an enrolled agent, a CPA or an attorney can represent a taxpayer during an Internal Revenue Service examination if the consultant signed the return in question. Federal regulations prohibit LTCs from representing taxpayers before IRS appeals and revenue officers.