Tax season is around the corner, so you need to prepare yourself. If you are researching your options and looking around to hire a tax professional to help you with your taxes; you need to find someone with the right experience and knowledge. You need to find someone who knows what they are doing. As well as someone you can trust that will get the job done the right way while keeping your sensitive information secure. If you are exploring the field of tax preparers; you have for sure come across two main terms: enrolled agent (EA) and certified public accountant (CPA).
When you are exploring the field of tax preparation, you might get easily confused by some acronyms and professional terms. The fact is that you need to do some research before coming to a final decision. You need to be sure you’re hiring the right professional that will guide you through your financial needs the correct way. Working with a tax advisor can help you maximize the tax efficiency of your business or investment.
EAs and CPAs are both tax experts, and the work they usually do is often similar. But they are licensed in a different way. An enrolled agent (EA) is a tax preparer who got his license at the federal level from the Internal Revenue Service; an enrolled agent is actually the highest status awarded by the IRS. While a certified public accountant (CPA) got his license from the applicable state boards of accountancy.
What Is an Enrolled Agent?
An enrolled agent (EA) is a certified tax advisor who is a federally-authorized tax practitioner licensed by the U.S. Department of the Treasury.
Enrolled agents do not need to have a college degree in the financial field. Every individual with a minimum of five years of experience in tax preparation with the IRS can apply to become an enrolled agent.
Enrolled agents must pass a three-part examination; or have adequate experience as an employee in the Internal Revenue Service to qualify for the position. All candidates for enrolled agents must first pass a sufficient background check.
An enrolled agent has unlimited rights to represent individual taxpayers before the IRS for any issues relating to tax collections, refunds, audits, or tax appeals. They also need to have a range of knowledge in different tax-related subjects such as income, payroll, returns, inheritance, non-profit, corporate, retirement taxes, and more.
EAs can provide expert tax advice help, file tax returns for individuals, corporations, non-profit organizations, and other entities.
To maintain their position as an enrolled agent people must:
- Complete continuing education of 72 hours every three years
- Fully comply with the ethical standards established by the Department of Treasury
A professional with a designation as an enrolled agent can make between $15,000 and $20,000 more than CPAs on yearly basis.
What Is a Certified Public Accountant (CPA)?
A certified public accountant (CPA) is a designation provided to licensed accounting professionals by the Board of Accountancy for each state. The CPA identification enables accountants to implement professional standards while in the accounting industry.
To become a certified public accountant every individual must meet different requirements. The CPA candidate must hold a bachelor’s degree in business administration, finance, or accounting; and complete a minimum of 150 hours of education in the field.
The CPA candidates must also have a minimum of two years of public accounting experience. They also have to pass the four-part Uniform CPA exam. The exam is universal for every state, however, each individual state has its own requirements for education and experience. Every state also has individual rules for maintaining the CPA license. However, most of them require at least 40 hours of continuing education annually with at least 3-4 hours covering ethics.
Certified public accountants provide their services mainly to public big or small accounting companies. CPAs can get a license as accountants, auditors, CFOs, financial planners, business advisors, forensic accountants, or tax consultants.
So CPAs could assist in all accounting, tax, and financial services for businesses in different industries: individuals, freelancers, and other entities. CPAs can help businesses achieve their financial goals, plan their finances accordingly and manage their money.
When to Work With an EA and When With a CPA?
An enrolled agent’s focus is on managing taxes for businesses and individuals. A certified public accountant has more flexible and broad proficiency.
When you are deciding between working with an EA or a CPA; you need to ask yourself “What type of financial issues am I looking to resolve?” What do you look to improve in your processes? What are your financial goals?
Enrolled agents can help you if you need assistance with working through an IRS audit or a collection problem. Some EAs have experience working as IRS agents, so when dealing with the IRS it might be worth trusting someone who knows how the system is working. Enrolled agents can also provide you with bookkeeping services for your business or organization.
Certified public accountants have more in-depth knowledge when it comes to strategically managing your business finances. CPAs are federally authorized to represent individuals in all matters that may arise before the IRS. They can help you with bookkeeping, financial planning, money management, and even tax planning.
EAs and CPAs, both types of tax and accounting professionals are equally capable to perform similar tax and bookkeeping tasks. But there is a sufficient difference in the depth and complexity of their services.
Enrolled agents and certified public accountants are both knowledgeable, educated, and experienced professionals.
Individuals need to pass rigorous exams to specialize in either of these fields. Both CPAs and EAs are affordable alternatives for people who need help with figuring out their tax obligations.
Make sure that if you decide to consult with either of the two types of professionals, you choose to work with a hardworking, ethical professional who can help you achieve your financial goals and who sets the right expectations for working together.