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Tax Accounting: An Overview

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Tax accounting is a branch of accounting relating specifically to taxes. Tax laws and regulations in the US are quite intricate, and their interpretation demands specialized knowledge, which tax accountants provide. Tax accountants, or tax preparers, work with individuals, small businesses, or corporations on their tax returns and financial planning. They are knowledgeable in national and state tax laws, and counsel their clients on these laws while ensuring their compliance.

A successful tax accountant will generally be a certified public accountant (CPA). CPAs are accountants who have passed the intensive CPA exam, which gives them licensure to practice accounting in their state. CPA certification denotes that an accountant can handle complex tax work, though not all accountants specialize in taxes. Besides CPAs, some tax accountants are enrolled agents (EAs) who have passed an equally comprehensive EA exam as well as a thorough background check by the Internal Revenue Service (IRS). It is up to a given client to pursue the top-rated CPAs and EAs to resolve complex tax situations.

Tax accountants often serve clients who want to minimize their tax payments or enlarge their understanding of their finances. The most experienced and well-trained tax accountants know every loophole of the US tax system and can help their clients pay as little as possible on their tax returns during tax season. Clients often have an initial consultation with a tax accountant before the accountant audits the given client's finances. Many clients first do a background check on the accountant by viewing their state's board of accountancy website, if the accountant is a CPA, or contacting the IRS Office of Professional Responsibility, if the accountant is an EA.



Tax accountants may work for public accounting firms or on-site for corporations. They may also work as contractors or be self-employed. They spend the majority of their time in contact with clients, advising them on their tax concerns. They spend the remainder of their time on accounting software and tax-related documents. If they work for individuals or small businesses, they take charge of their clients' finances by making required payments to the state or federal government, monitoring changes in their clients' income, and submitting all tax return paperwork to the federal government by April 15th. If tax accountants work for large corporations, they meet regularly with executives to ensure that corporate policies comply with tax regulations. Corporate tax accountants also advise other divisions of a company on their tax affairs.

Besides advising their clients on their tax concerns, tax accountants keep up to date on the US and state tax systems by reading industry publications and performing research. They work frequently with computers, especially with accounting software such as Intuit QuickBooks and Lacerte. In businesses, tax accountants use this software for payroll accounting. In payroll accounting, tax accountants deduct Social Security, Medicare, federal and state income taxes, and worker compensation insurance from salaries.

For both companies and individuals, tax preparers and other accountants prepare balance sheets that display the given client's financial state. They create such a balance sheet by recording accounting assets on the left side of the sheet and then recording liabilities on the right side. Accountants strive to prevent liabilities from surpassing assets, and inform company managers when it appears that any alarming condition is incipient. These balance sheets are essential to tax accountants because they tell them how to fill out the tax returns for their clients.

Tax accountants are urged to earn a bachelor's degree in accounting, business administration, or finance. They need to especially pursue courses in tax law, as they need full knowledge of both state and federal tax laws for their work. Some tax accountants opt to get a master's degree, as many top-rated employers may require it. All tax accountants must complete the CPA exam, which requires a four-year degree and at least 150 semester hours practicing accounting, such as through an internship. Aspiring tax accountants are also encouraged to gain deep knowledge of accounting software, as they will use it to fill out tax returns.

Once tax accountants are licensed through the CPA exam, they can expect to make about $53,000 per year. As they accrue experience, their salaries will rise accordingly. Senior-level tax accountants make an average of $75,000 per year, with a handful of corporate accountants topping six figures.

The job opportunities for tax accountants are expected to grow slightly faster than average. This expansion reflects the greater number of people who are turning to financial consultants to gain control of their finances and prevent IRS auditing. However, this job growth will be impeded by the arrival of advanced software programs that people can purchase to do their own tax returns. Nonetheless, tax accountants who have sufficient training, education, certification, and reliability should have little trouble finding jobs.
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