An Enrolled Agent has unlimited representation rights in front of the IRS and is largely considered America’s Tax Expert. An Enrolled Agent credential is the highest credential issued by the IRS. Boundless Advisors employs Enrolled Agents as their tax experts.
IRS definition of an Enrolled Agent
“An enrolled agent is a person who has earned the privilege of representing taxpayers before the Internal Revenue Service by either passing a three-part comprehensive IRS test covering individual and business tax returns, or through experience as a former IRS employee. Enrolled agent status is the highest credential the IRS awards. Individuals who obtain this elite status must adhere to ethical standards and complete 72 hours of continuing education courses every three years.
Enrolled agents, like attorneys and certified public accountants (CPAs), have unlimited practice rights. This means they are unrestricted as to which taxpayers they can represent, what types of tax matters they can handle, and which IRS offices they can represent clients before. Learn more about enrolled agents in Treasury Department Circular 230 PDF (PDF).”
The above paragraph can be found on the IRS website: https://www.irs.gov/tax-professionals/enrolled-agents/enrolled-agent-information
EA vs CPA
This is not a who is better post. Being an Enrolled Agent has its advantages and disadvantages. Holding a CPA credential also has its advantages and disadvantages. CPA stands for Certified Public Accountant and is a credential issued at the state level by the state board in accountancy. Some CPAs do not do any tax work. Boundless Advisors has CPAs as clients where we prepare their returns for them.
CPA Requirements
Generally speaking in order to become a CPA there are several steps to take, although each state is slightly different in their requirements. This post will go over the most common requirements; in total there are are 55 licensing jurisdictions for CPAs – 50 states and 5 territories.
All licensors require a bachelor’s degree with at least 150 hours of coursework. Some states require a specific number of accounting classes, some do not. Some states do not have an ethic requirement.
In addition to the education requirement, there is also a testing requirement. A CPA must pass a four part test and each part is geared towards a specific area/niche of accounting as a whole.
Some states also require a working component to become a CPA. In Washington State, for example, a potential CPA has to work for a minimum of 12-months and 2,000 hours in accountancy under the supervision of a currently licensed CPA.
Basically, a CPA credential is an all-around accounting credential that also allows the CPA to produce audited financials for publicly traded companies. CPAs have degrees, pass a 4-part test, renew every three years, and have a continuing education requirement. CPAs have strict privacy rules and can be reported to their local state Board of Accountancy for misconduct claims.
EA Requirements
In order to become an Enrolled Agent (EA) the person has to take and pass a three part proctored exam. All three of the exams must be passed within a 2-year period. After passing all three exams the potential EA must apply for licensure by the IRS.
The IRS conducts a “suitability check” as part of the licensure exam. It can take up to 90-days to receive an approval or a denial of the EA credential after applying.
The requirements to receive, and maintain, an Enrolled Agent (EA) credential is the same regardless of where the person resides as the credential is issued by the Internal Revenue Service and maintained at a Federal level versus a state level.
After receiving an EA license the licensee must certify in Ethics annually, agree to Circular 230, renew every three years and maintain at least 16 hours of continuing education annually with a minimum of 72 hours every three years. They must also be able to continue to pass a suitability check by the IRS. They are also held to strict privacy standards and can be reported to the IRS for professional misconduct.
An Enrolled agent cannot sign audited financials. If someone claims to be an Enrolled Agent, verify EA credential online. You will need their legal last name and zip code. An EA is a tax expert and Enrolled Agent’s have unlimited representation rights in front of the IRS.
However, there is no minimum traditional education requirement to become an EA besides passing three tests. In my experience people new to taxation/being an Enrolled Agent should work under an established mentor prior to striking out on their own. As a potential client it is important to verify experience, and knowledge, of both an EA and CPA.
Choosing a Tax Expert
Ultimately, choosing a tax expert is a highly personal decision and one that should not be left to fate. Here are my top five tips to choosing a tax professional
- Ask friends and family for referrals
- Use small independent firms, versus large impersonal firms
- Verify credentials. Anyone whom you pay to prepare your return should be signing the return as the paid preparer Avoid: Ghost Preparers
- Make sure the tax expert’s risk tolerance is the same as yours, and ask what support they offer should you get an IRS love letter.
- Location doesn’t matter. Don’t be afraid to find a virtual tax preparation firm.
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