What Is an Enrolled Agent (EA)?

Corey —  October 18, 2010 — 3 Comments

What Is an Enrolled Agent (EA)?       After hemmin’ and hawin’ about it for a while, I finally signed up to take the exams to become an Enrolled Agent. I’m excited about it (and a bit nervous), but I’m guessing most of you have no idea what I’m talking about. That’s because I didn’t even know what an Enrolled Agent was until I had a couple years of experience doing taxes and working as a financial planner. So here’s a basic overview of what an Enrolled Agent is and why I decided to become one.

What Is an Enrolled Agent (EA)?

       An Enrolled Agent is a person who has been authorized to represent taxpayers (without the taxpayer’s presence) before all administrative levels of the Internal Revenue Service (IRS) for audits, collections, and appeals. They aren’t restricted on which taxpayers they can represent and what types of tax matters they can handle.

How Is an Enrolled Agent Different from Other Tax Preparers?

       Until 2011, Enrolled Agents are the only tax preparers required to demonstrate their competence in tax matters to the IRS. (This is changing – see my note in the section below on why I decided to become an EA.) Attorneys and CPAs may or may not specialize in taxes, but all EAs specialize in taxation. They’re also required to fulfill continuing education requirements by law – at least 72 hours every three years. While CPAs have continuing education requirements for their license, the courses EAs take must be related to Federal tax laws. CPAs often take courses on a variety of topics not related to taxes.

       Unlike other tax preparers, Enrolled Agents (along with CPAs and attorneys) can represent taxpayers before the IRS even if they didn’t prepare their return. This is important because these other tax preparers can’t represent a taxpayer before appeals officers, revenue officers, or IRS Counsel. A tax preparer must be an Enrolled Agent, CPA, or attorney to do that. Also, an unenrolled tax preparer cannot execute claims for refund, receive refund checks, execute consents to extend the statutory period for assessment or collection, execute closing agreements, or execute waivers of restriction on assessment or collection of a deficiency in tax.

How Do You Become an Enrolled Agent?

       There are two ways to become an Enrolled Agent. You can pass a three part exam (called the SEE or Special Enrollment Examination). The three parts cover individual taxes, business & other entity taxes, and representation, practices, and procedures. Each part of the exam contains 100 questions. It’s a very comprehensive and difficult exam. Here’s a list of the documents the IRS recommends reviewing before taking the exam.

       The other way to become an Enrolled Agent is to work for the IRS for five years in a position that regularly required you to interpret and apply the tax code and its regulations. Regardless of which method you choose (exam or IRS work experience), you have to undergo a thorough background check on both your criminal history and your personal tax filing history. You can be sure you’ll be denied if you didn’t file, didn’t pay your taxes, or filed a fraudulent return. (You’d think they would have run this kind of check on Timothy Geithner before Obama nominated him to become the Secretary of the Treasury!)

Why I Decided to Become an Enrolled Agent

       I have three main reasons I decided to become an EA. Here they are:

  1. Provide Better, Higher Quality Service – I didn’t want to be in a position where I couldn’t represent my tax clients if they had an issue with the IRS that involved appeals or collections. Becoming an EA ensures that I can help my clients no matter what tax issue comes up. (Except for going to court – you need an attorney for that.)
  2.  

  3. Strengthen My Tax Knowledge – Taking the Enrolled Agent exams requires you to carefully study all aspects of Federal taxes. I’m familiar with most individual tax issues and some business, trust, and estate issues, but there’s still quite a bit that I’m not 100% comfortable with. Passing the exam won’t magically make me an expert, but it, along with the continuing education requirements, will ensure that I have a more complete and deeper knowledge of Federal taxes.
  4.  

  5. Upcoming IRS Requirements for Tax Preparers – Starting in 2011, the IRS is going to require all paid tax preparers (except EAs, CPAs, and attorneys) to register, pass a knowledge examination, and complete continuing education. The test likely won’t be as difficult as the EA exam, and the continuing education requirements aren’t as stringent either. But these tax preparers will still be limited in which taxpayers and tax matters they can represent before the IRS. It seemed to me that it would be better to just become an EA in the long run.

       Obviously, I’m not doing it for the marketing advantage as I’ll probably spend the rest of my professional life explaining what an EA is. But that’s OK with me because I know it’s valuable and will help my clients.

       Well, now you know what an EA is. What do you think? Sound like it was a good thing for me to pursue?

photo credit: (Alan Cleaver on Flickr)

Corey

Posts

Corey is currently pursuing a Master of Arts degree in religion. While he enjoys learning and writing about Christianity, another one of his new passions is writing about personal finances in order to help others make wise decisions with their money.

3 responses to What Is an Enrolled Agent (EA)?

  1. Paul,
    I love your writing and admire your decision to become an EA. Your article lacks some key information that could lean readers to make uneducated choices that affect their finances especially in your comparison of Enrolled Agents to Certified Public Accountants.
    1) “Enrolled Agents are the only tax preparers required to demonstrate their competence in tax matters.” FALSE. Certified Public Accountants are required to have a minimum of a Bachelor’s degree and in some states a Master’s degree in finance. As you mentioned the EA has no educational requirement. CPAs are required to take 4 major exams from 2.5 to 4.5 hours long to demonstrate competency in ALL financial aspects. Currently, fewer than 50% of the people who take the CPA examinations pass. Statistically, it is easier to pass the bar exam and become a lawyer. Part of the testing to become a CPA covers the exact material you’re required to study to become an EA. Certified Public Accountants are held to higher standards by law than Enrolled Agents.
    2) “CPAs may or may not specialize in taxes” TRUE. However, a CPA who is not competent in tax law is not allowed to practice in that field. CPAs are required to refuse any work that they are not competent to perform. Because financial matters are so diverse and complex CPAs must specialize. Example: Would your dermatologist offer to deliver your child? Doubtful. Similarly, a government auditor probably wouldn’t offer to prepare personal income tax returns.
    3) “other tax preparers can’t represent a taxpayer” FALSE. See Form 2848 and Circular 230.
    This is an excellent article from an EA point of view. My point of view is slightly different…having corrected many tax returns prepared by non-CPAs. If your taxes are relatively simple, definitely take them to HR Block or an EA. Once you cross over into complex issues that require valuations, international business, and decisions that affect multiple years’ tax returns, a CPA is better educated in those areas.

  2. Hi, Orchid! Thanks for commenting. I should clarify what I was saying a bit, so I’ll respond to your points as you numbered them.

    1. You’re right that CPAs cover much of the same material as the EA exam. However, my comment (in context) was still correct. CPAs are not required to prove their competence to the IRS. They’re proving it to the state that licenses them. Small difference and I think it’s good you clarified, but I was not trying to deceive anyone with my comment. It’s technically correct. :)

    2. I just wanted to clarify that a person is a tax specialist just because they’re a CPA. It’s a common assumption and it’s not always true. Many CPAs do specialize in taxes and they’re obviously tested on it. But not all do and they may very likely forget everything they learned about taxes after the exam.

    3. Again, please check the context of my comment. I said other tax preparers can’t represent a taxpayer before appeals officers, revenue officers, or IRS Counsel and that is correct. Form 2848 actually spells out the fact that there are limitations on unenrolled preparers (everyone who is not an attorney, CPA, or EA).

    I certainly agree that for highly complex issues like valuations, int’l business, and complicated tax problems you should contact a specialist. But there’s no reason an EA couldn’t have the same level of education as a CPA in those areas if he/she so chose to specialize in those subjects. Again, I think it’s a matter of what a professional chooses to study and focus on after the education and exams are over that truly mark their expertise.

Trackbacks and Pingbacks:

  1. 280th Carnival of Personal Finance - October 25, 2010

    […] Planning knows what an Enrolled Agent is (EA). Do […]

Leave a Reply

Text formatting is available via select HTML. <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>

*