Is your tax preparation being done by an EA or CPA?
While this question may not seem relevant to you, the answer may determine what protections you have and the level of representation you may need should you have to work with the IRS regarding your tax return. If you are like most people, you only think about your tax return when you need to file. Gaining a better understanding of the landscape of tax preparation will help you navigate the sea of acronyms and the importance of certain accreditations when looking for a licensed tax professional. Below we guide you through the EA vs. CPA comparison so you can make the best choice.
What Is An EA (Enrolled Agent)?
An Enrolled Agent is a person who has passed a proficiency exam or worked as a former IRS employee. They are licensed to represent taxpayers before the IRS. Compared to CPAs and Tax Attorneys, Enrolled Agents generally charge less for their services. To the client with limited funds, this might seem like an attractive option. An Enrolled Agent, or EA, is a kind of tax professional who focuses narrowly on managing tax arrangements for business or private entities. EAs boast a wide range of knowledge in such tax-related subjects as income, estate, gift, payroll, levies, returns, inheritance, non-profit and retirement taxes. Once EAs pass their qualifying exam, the federal government recognizes them as tax specialists. An EA’s typical responsibility includes representing his or her clients—businesses or individuals—before the IRS on issues of audits, appeals or tax collection. An EA is the highest credential the IRS awards. You’ll want to seek out an EA for any and all tax-related issues, as they’re the uncontested experts on such topics, according to the IRS.
Qualifications Of An Enrolled Agent
In order for Enrolled Agents to gain their status from the IRS, they must take a three part exam called the Special Enrollment Examination. This three part exam covers all aspects of federal taxation: Individual Taxes, Business Taxes, and Representation, Practices and Procedures. Each part of the exam has 100 questions and the time limit for each part is 3.5 hours. This exam is a big one and requires that tax preparers thoroughly know the tax law. Many tax preparers go through rigorous coursework and training in tax preparation and tax law before they even consider taking this exam.
Continuing Education Requirements
Enrolled Agents are required by the IRS to obtain 72 hours of continuing education every three years. A minimum of 16 hours must be earned per year, two of which must be on ethics.
Pros Of Hiring An EA:
- 5 years IRS experience
- Typically less costly than a CPA
- Licensed by the federal government through the U.S. Department of Treasury
- Able to service any state in the country
What Is A CPA (Certified Public Accountant)?
Most CPAs do not actually specialize in taxation. The vast majority of CPAs only work on tax matters for three or four months out of the year, spending the rest of the time on other accounting services. And even then, tax resolution makes up only a fraction of their focus and experience. CPAs help their clients set and achieve their financial goals through money management and financial planning. These goals could be anything from putting a down payment on a home to opening a new branch of businesses across the country. CPAs are the go-to if you’re looking for a broad scope of expertise. Also, states approve CPAs, while the federal government approves EAs. CPAs typically do most of their work for public accounting firms of all sizes. They can assist as advisors and consultants for all accounting, tax and financial services for businesses, individuals and other organizations.
Pros Of Hiring A CPA:
- Complete state education requirements, (usually 150 hours)
- Broad accounting services
- Typically charge a monthly retainer, plus hourly wage
- Not trained to represent someone in an adversarial proceeding, such as negotiating a tax settlement with the IRS.
- Licenced by state
Should You Choose Enrolled Agent Or CPA?
When it comes to filing your taxes, make sure you choose someone who truly knows the tax law and can prepare your return accurately. At Brigg’s Business & Tax, we have EAs who would love to be your trusted tax advisor! Our staff also consists of CPAs and tax preparers who teach taxes and write tax preparation curriculum. Schedule today!