What is a Tax Accountant?

For those needing professional assistance to handle their finances, hiring a professional tax accountant is a good choice. Tax accountants are the financial experts who understand all the government rules and regulations that determine the amount of money owed to federal, state, or local agencies. Not only can these professionals find the appropriate ways to save money on taxes owed, but they can also advise clients about managing their assets to minimize tax penalties, inform them of changes in tax laws, and assist them in any legal disputes or audits that arise. For potential clients, choosing the right tax professional means understanding the training, credentials, and specializations that tax accountants may possess.

What Tax Accountants Do

Tax accountants are specialists who know Internal Revenue Service (IRS) tax codes like the backs of their hands. Tax accountants are equipped to produce tax filings accurately. Tax accountants work with individuals and enterprises to report financial data to the government. Unlike tax examiners, a tax accountant doesn’t review and audit tax filings to collect money. Unlike tax preparers, tax accountants can do more than write up tax returns. Tax accountants also help clients develop a profitable tax planning strategy. Tax accountants advise managers on ways to lower, defer, or completely cut tax payments. Tax accountants build step-by-step plans for clients to reduce taxable income and raise deductions year-round. Meeting clients’ financial growth goals by maximizing tax refunds within the law is their goal. Accountants can further specialize in tax accounting niches, such as mergers and acquisitions tax or estate tax.

Where Tax Accountants Work

Every working adult and non-exempt entity needs to file IRS tax forms. Therefore, tax accountants can find employment in diverse work settings. Many tax accountants work at public accounting firms, including Deloitte, Ernst & Young, and PricewaterhouseCoopers. Tax accountants can work in-house or consult with private corporations. Tax accountants find jobs at government agencies, such as the Department of the Treasury and Internal Revenue Service. Financial institutions like banks, insurance carriers, and investment brokerages have tax accounting staff. Tax accountants can work at hospitals, colleges, K-12 school districts, manufacturing facilities, software startups, and more. Some tax accountants even work for mutual and hedge funds. Tax accountants have a flexible, full-time financial services career. About 7 percent of tax accountants are self-employed and telecommute from home offices.

Average Salary of a Tax Accountant

The Bureau of Labor Statistics reports a mean annual wage of $79,520 for tax accountants. America’s 1.28 million accountants, including tax accountants, make $38.23 per hour on average. The lowest 10 percent of tax accountants have a $44,480 median paycheck. The top 10 percent of tax accountants receive median compensation of $124,450. Most tax accountants fall into the $55,900 to $94,340 income range. To compare, tax preparers have mean earnings of $46,860. The average salary for tax examiners and collectors is $60,960. Tax accountants at public accounting firms have an $83,460 median yearly wage. Tax accountants in local government bring home $69,180 average pay. The federal executive branch provides an annual mean income of $100,260. Tax accountants in the business transportation industry have the highest earnings average of $104,110.

Future Job Outlook for Tax Accounting

The U.S. News & World Report recognized tax accountants for having the 42nd best job. Current unemployment for tax accountants is a low 1.8 percent. Prospects are good for new tax accountants. The Department of Labor predicts the employment of tax accountants will rise 6 percent. Through 2028, the number of accountants will jump to 1.514 million. About 90,700 new accounting jobs are expected this decade. In comparison, the demand for tax examiners and collectors will drop two percent for 1,400 jobs lost. Accounting clerks will have a four percent hiring decline and lose 65,800 jobs. Tax accountants have one of the sunniest 10-year outlooks in financial services. What’s driving demand for tax accountants? Recent changes to the tax code and regulations are making more clients hire tax accountants. The healthy economy also has more businesses starting up and needing tax guidance.

Educational Requirements

Years ago, tax agencies employed accountants with general bookkeeping skills and an associate’s degree from a business college to do seasonal work at income tax time. With the increased complexity of tax laws across all levels of government, today’s professionals need at least a bachelor’s in finance or business. Typically, this is a general accounting degree with studies focused on financial planning, taxation principles, auditing, cost and tax accounting, and tax laws at federal, state, and local levels. Additionally, some financial institutions and government agencies prefer a tax accountant to hold a master’s degree in specialized tax areas combined with job experience.

Certifications

Accounting school graduates can work without certification in general bookkeeping and accounting jobs for finance departments of private and public institutions. State and federal governments, however, require tax preparers to hold appropriate certifications before becoming licensed to practice in certain jobs. Two certification paths are available:

  • Certified Public Account (CPA): A CPA is licensed at the state level to work with tax documents and file paperwork with the U.S. Securities and Exchange Commission. CPA candidates must complete approximately 30 hours of coursework above the level of their bachelor’s degree. Many undergraduate programs now include this training in their curricula so that students can take the rigorous CPA exam upon graduation.
  • Enrolled Agent (EA): While a CPA is licensed at the state level, an EA has passed certification requirements to be licensed by the federal government. An EA specializes in taxation and has the authorization to represent clients in IRS proceedings. To earn an EA certification, candidates must study to pass a comprehensive tax law exam or have worked for the IRS for a minimum of five years interpreting and applying tax codes.

Comparing these credentials, CPA certification requires more comprehensive preparation. A CPA usually deals with financial planning issues and is competent to handle most general income tax preparations and filings. On the other hand, an EA has more qualified experience with IRS legalities and procedures, especially when dealing with audits. An EA is often employed by businesses to handle complicated tax situations.

Finally, keep in mind that to combat the complexity of tax laws, tax accountants specialize their practices to become experts in certain areas. For example, businesses will consult with tax accountants who understand their specific financial management needs, such as contract law, wages and compensation practices, income reporting, inventory distribution, or asset liabilities. With the right type of certified tax accountant, businesses and people can be assured of receiving the appropriate expert advice required to protect their financial interests.

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