Tax Return Preparer

Publication Date :

25 Apr, 2025

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Table of Contents

Tax Return Preparer Meaning

A tax return preparer (TRP) is a tax professional with an IRS Preparer Tax Identification Number (PTIN) permitted to draft tax returns for the federal government. They help clients comply with federal and state tax laws while filing accurate returns and minimizing tax liabilities.

There are two types of tax return preparers: signing and non-signing preparers. Each type has different skills, expertise, and education levels, leading to varying rights of representation. Attorneys, enrolled agents, and certified public accountants (CPAs) Have unrestricted authority to represent before the IRS, while preparers without these credentials have limited representation rights.

Key Takeaways

A Tax Return Preparer (TRP) is an IRS-registered tax professional with a valid PTIN who prepares both federal and state tax returns, follows regulations, and helps reduce clients' tax burdens.
TRP duties include consulting clients, maintaining confidentiality, staying updated on tax regulations, reviewing financial records, completing tax forms, and using specialized software.
To become a TRP, one must gain tax knowledge, apply for a PTIN, invest in tax preparation software, start with simple returns, expand to more complex cases, and ensure accurate and profitable tax services.
TRPs assist with preparing, assisting, and reviewing tax returns for compensation. Some tax professionals, like attorneys and CPAs, have additional mandatory competency requirements.

Tax Return Preparer Explained

A tax return preparer is a professional who, for compensation, prepares a substantial portion of any tax return or claim for a refund under the Internal Revenue Code. Most registered tax return preparers have a PTIN issued by the IRS, allowing them to act as tax return preparers and assist individuals and businesses in preparing and filing tax returns, often using tax preparation software. They are required to follow ethical standards and maintain their professional competency through continuous education and training.

TRPs contribute to maintaining high standards of competency and accountability in the tax system. They help reduce errors, improve the quality of tax returns, and make it easier for individuals and small businesses to comply with IRS regulations. TRPs serve as facilitators, helping taxpayers navigate the complexities of the tax code and ensuring that tax returns are accurate and complete.

TRPs play a crucial role by ensuring that individuals and businesses file accurate and complete returns in compliance with IRS guidelines. Their integrity helps uphold the standards of the tax system and supports increased revenue collection for the government. TRPs help clients minimize their tax liability by ethically maximizing deductions and reducing errors. Their expertise is also essential in navigating complex tax situations and ensuring compliance with changing tax laws.

Duties and Responsibilities

A Tax Return Preparer (TRP) has duties and responsibilities similar to those of a general tax preparer, including:

Consulting clients to understand their tax needs and financial situation, providing advice on the tax return process.
Responding to client inquiries by answering their questions and addressing concerns.
Prepare accurate tax returns by reviewing financial documents such as 1099s, W-2s, and receipts.
Completing tax forms based on client information, ensuring timely and accurate submission.
Maintaining client confidentiality by safeguarding financial records and sensitive data.
Staying updated on tax laws and regulations to provide accurate advice and maximize client benefits.
Using professional tax software to efficiently prepare and file tax returns.

How To Become?

In order to qualify as a professional Tax Return Preparer (TRP), certain criteria must be met:

Acquire the necessary knowledge of tax return preparation through IRS resources, certification courses, and educational platforms that cover tax laws and address any knowledge gaps.
Apply for and register with the IRS to obtain a Preparer Tax Identification Number (PTIN) after passing the required eligibility test.
Purchase and use professional tax software to work efficiently and ensure the success as a TRP.
Start small, then expand by gaining tax clients, handling increasingly complex tax matters, and providing accurate and compliant tax services while growing business profitably.

Salary

A Tax Preparer in the U.S. typically earns around $44,884 per year as a base salary. On top of that, they might receive about $12,568 in additional pay, such as bonuses, commissions, tips, or profit-sharing. This brings the total average annual pay to roughly $57,452.

Tax Return Preparers (TRP) vs. Income Tax Practitioner (ITP)

The key differences between Tax Return Preparers (TRP) and Income Tax Practitioners (ITP) are the following:

Tax Return Preparers (TRP)	Income Tax Practitioner
Paid professionals who assist in preparing, reviewing, and filing tax returns in exchange for compensation.	Have mandatory competency requirements, such as being enrolled agents, attorneys, or Certified Public Accountants (CPAs).
The majority operate under varying degrees of oversight, with little or no federal regulation.	Must meet professional competency standards regulated by professional bodies such as CPAs, attorneys, or enrolled agents.
Governed by federal regulations under the IRS Tax Return Preparer initiative since 2010.	Subject to federal oversight and regulations.
Required to comply with IRS standards, with penalties for unethical conduct.	Must uphold the highest ethical standards enforced by regulatory bodies and the IRS.