As Americans rush to complete their tax returns by this year's April 18 deadline, millions of them will turn to paid tax preparers, often at a store in a local shopping mall, for help and expertise. According to Internal Revenue Service projections, some 80 million households will have used such services during tax season.
But can customers really be sure that these preparers know and understand the tax code? The short answer: They can't.
The latest data from the IRS suggest that more than half of the 700,000 paid tax preparers in the United States do not have nationally recognized professional credentials. Most Americans have a one in two chance that their preparers do not hold a professional license and have never had their tax expertise tested or validated by a professional school, association or government agency. As the data indicate, only about 30 percent of all tax preparers are certified public accountants, 8 percent are enrolled agents, 3 percent are tax attorneys, and another 3 percent have lesser-known credentials, such as enrolled actuary or supervised registered tax preparer. A whopping 56 percent do not hold any nationally recognized credential to certify that they thoroughly comprehend what they are doing when filling out tax forms on their customers' behalf (usually with the help of software programs).
(Conditions are somewhat different in Maryland, New York, California and Oregon. Tax preparers in those states are required to be professionally licensed, and their knowledge of taxes is validated with mandatory tests. Still, many of them do not possess nationally recognized credentials such as those of a CPA, enrolled agent or tax attorney.)
This isn't to say that non-credentialed preparers are unqualified to do your taxes or are not motivated to do their job well. In fact, research I have recently conducted on preparers at one of the large tax-service chains shows that many of these workers feel an incentive to take training courses and keep abreast of changes in the law. Their initiative is surprising and perhaps even admirable, given their poor working conditions, including typically low pay, the seasonal nature of their employment, required duties for which they're not compensated and virtually no opportunity for advancement.
So why do they tough it out? Because of us, their customers. We give them their incentive because we go to them with the assumption that a tax preparer, even one working at a storefront national chain, is part of the respected profession of accounting. By assigning these preparers the identity of an expert, we as customers afford them a level of respect that both inspires them to do right by their clients and helps compensate for the indignities of the job.
Indeed, in my interviews with preparers for my research, they were not bashful about voicing their complaints about their working conditions. But I found that these complaints actually signaled their sense of their own professionalism. That is, they felt they didn't deserve the shortcomings of the job because they saw themselves as members of an esteemed profession ― despite their not having professional credentials.
While the formal quality checks, such as certification, are still mostly lacking in the industry, the good news is that your tax preparer is likely up to the task, even without a professional credential. It also is a reminder (to those of us who need it) that being respectful to the people working for us makes them work even harder for our benefit.