Enrolled Agent Explained

 Enrolled agents (EAs) are America’s Tax Experts®. They are the only federally-authorized tax practitioners who both specialize in taxation and have unlimited rights to represent taxpayers before the Internal Revenue Service. These tax specialists have earned the privilege of representing taxpayers before the IRS by either passing a three-part examination covering individual tax returns; business tax returns; and representation, practice and procedure, or through relevant experience as a former IRS employee. All candidates are subjected to a rigorous background check conducted by the IRS. 

• Enrolled Agents are tax experts.
• Enrolled Agents are regulated by the Department of the Treasury to represent taxpayers before the IRS for audits, collections and appeals.
• Enrolled Agents hold a federal license and have an unrestricted right to represent any taxpayer in any state.
• Enrolled Agents are held to a stringent Code of Ethics.
• Enrolled Agents must fulfill continuing tax-centric education requirements.

•  To become an enrolled agent, candidates must pass the IRS’s Special Enrollment Examination, which covers individual and business tax issues, representing clients before the IRS, ethics, and more. They also must pass a suitability check and obtain a Preparer Tax Identification Number from the IRS. 
• Enrolled agents are required to satisfy continuing education requirements to maintain their certification. This includes at least 16 hours of course work each year, with two hours on ethics or professional conduct, and a total of at least 72 hours every three years.
• When looking for an enrolled agent, think about whether you want someone local or remote. Also set up an initial consultation to learn more about their experience, fee structure, and services provided.

If you need someone to do your taxes, help you lower future tax bills, or speak to the IRS on your behalf, you might want to hire an enrolled agent (also known as an EA). They’re tax professionals who are also authorized to represent taxpayers before the IRS. And like some certified public accountants (CPAs) and tax attorneys, enrolled agents are specifically focused on taxes.

Enrolled agents must pass a rigorous exam that covers general tax issues, ethics, practicing before the IRS, and more. They’re also required to take additional classes each year after passing the exam. As a result, enrolled agents can handle a wide variety of tax matters, including tax return preparation, tax planning, IRS audits, and tax appeals.

However, before spending time looking for an enrolled agent, you probably want to know a little more about them. For instance, what kind of training do they receive? How do they compare to other tax professionals? And what’s the best way to find an enrolled agent? Read on to get answers to these questions and more.

While there are no formal educational requirements for enrolled agent candidates – such as a college degree – they generally have to pass the Special Enrollment Examination (SEE), which is administered by the IRS. However, certain former IRS employees don’t have to take the SEE to become an enrolled agent.

The SEE has three parts:

• Part 1 - Individuals. This part covers information related to taxes on individuals, such as types of taxable income, tax deductions and credits, retirement accounts, selling property, preparing personal income tax returns, advising individual taxpayers, estate taxes, and more.
• Part 2 - Businesses. Among other things, this part deals with the different types of business structures (such as C corporations, S corporations, partnerships, limited liability companies, and sole proprietorships), business income and expenses, analysis of financial records, tax-exempt organizations, and advising business taxpayers.
• Part 3 - Representation, Practices, and Procedures. The final part covers practicing before the IRS, filing tax returns, tax law research, IRS audits, ethics, working with clients, and various rules enrolled agents must follow.

In addition to passing the SEE, enrolled agent candidates must pass a “suitability check,” which includes a background check for tax compliance and criminal convictions.

An enrolled agent also has to obtain a Preparer Tax Identification Number (PTIN) from the IRS. In fact, all tax return preparers who are paid to prepare any federal tax return, claim for refund, or most other tax forms submitted to the IRS must have a PTIN.

 Once these requirements are met, EA certification can be granted by the IRS. At that point, they can represent taxpayers regarding any tax matter before the tax agency. 

 Enrolled agents have to take a certain number of continuing education courses to maintain their status with the IRS. These courses ensure that they stay up-to-date on the latest tax laws, regulations, and IRS procedures.

There are actually two continuing education requirements that must be satisfied. First, enrolled agents have to complete 72 hours of classes every three years. In addition, they also must complete a minimum of 16 hours of continuing education classes each year (two of which must be on ethics or professional conduct).

 Once certified, enrolled agents – and other tax professionals – can be suspended, fined, or even lose their right to practice before the IRS for:

• incompetence
• disreputable conduct, such as not being current on their own tax returns or being convicted of a crime
• violating IRS regulations governing enrolled agents
• misleading or threatening a client (or prospective client) with the intent to defraud

If you believe an enrolled agent has committed an ethical violation, you can submit a complaint to the IRS.

Enrolled agents are often a great choice if you need a tax professional. They’re generally well-versed in all aspects of tax preparation, from maximizing deductions to identifying potential red flags that may trigger an audit. They can also help individuals and businesses make informed decisions about their finances and ensure that they’re in compliance with tax laws.

However, in some cases, you might want to consider another type of tax professional – such as a CPA or tax attorney. For example, if you need help with something that’s beyond the scope of what enrolled agents typically handle, a different type of tax pro might be best for you. To help you determine if hiring a CPA or tax attorney might be the way to go, let’s take a quick look at some instances where they might be a better choice than an enrolled agent.

Both enrolled agents and CPAs can prepare tax returns, offer tax planning advice, and represent clients before the IRS. However, there are important differences between enrolled agents and CPAs when it comes to their education and the tasks they can handle.

CPAs generally have a higher level of education and training. For instance, unlike enrolled agents, CPAs must have an undergraduate college degree. A certain number of college credits in accounting is typically needed, too. In addition, since CPAs have to earn more college credits than most undergraduate degrees require, they often have more years of college than necessary or have taken graduate-level classes. Plus, most states require CPAs to work under the supervision of a licensed CPA for a certain period of time before they can practice on their own.

Because of these heightened education and training requirements, and their expertise in accounting, CPAs can often provide a wider range of services than an enrolled agent – especially when it comes to assisting businesses. For instance, many CPAs can handle both tax- and accounting-related tasks, such as preparing or analyzing financial statements. In addition, many CPAs have a deep understanding of business operations and are able to help create a budget, forecast future financial performance, develop and implement internal controls, perform business valuations, and more.

As a result, if you need help with a more complicated tax matter or with financial tasks beyond taxes, you might want to consider a CPA instead of an enrolled agen

Since their training (law school and passing the state bar exam) is focused on the law, tax attorneys typically offer a different set of services than enrolled agents.

While some tax attorneys will do your taxes and provide tax planning services (like enrolled agents), their work is often centered around representing clients on tax matters in court, before the IRS, or in disputes with state tax agencies. This includes defending clients against criminal charges for tax evasion or tax fraud.

While enrolled agents can also represent clients before the IRS, they can’t do so in a court of law. In addition, the more complex your tax situation, the more likely you are to need a tax attorney’s assistance and advice.

Tax attorneys are also frequently hired to explain the tax implications of various transactions, interpret new tax laws and regulations, and advise clients on gray areas of the tax law. So, even though enrolled agents can be a great choice for tax preparation services, you might need the help of a tax attorney if you need to dive deeper into the law to handle a tax-related situation.

Once you’ve decided that an enrolled agent might be a good fit for you, you’ll have to go through the process of finding and hiring one. Naturally, you probably have a lot of questions if this is the first time you’ve hired a tax professional. So, before you pick someone to help with your tax return or tax situation, check out our answers to the following frequently asked questions about hiring an enrolled agent. 

EA certification is obtained through the IRS, not through any particular state. As a result, an enrolled agent in New York can help you with a federal tax matter even if you live in California. But even though you can hire an enrolled agent in another state, there are certainly some advantages to working with a local tax expert.

For instance, it’s easy to have face-to-face meetings if you’re working with a local enrolled agent. That can foster greater communication with your tax pro and be more convenient when discussing personal financial matters.

An enrolled agent near you might also be able to refer you to other local professionals, such as bankers and lawyers, who might be able to provide other financial services. If you’re a business owner, a local enrolled agent will likely have a better sense of the local business climate, too.

By hiring a local enrolled agent, you’ll also be supporting the local economy. That’s a benefit to your own community.

It’s always a good idea to confirm that an enrolled agent is actually credentialed. Fortunately, there are a couple of easy ways to do this.

First, you can check the IRS’s online directory of tax return preparers. An enrolled agent who holds professional credentials recognized by the IRS should be included in the directory.

You can also verify an enrolled agent’s credentials by emailing the IRS at epp@irs.gov. Provide the enrolled agent’s:

• first and last name
• complete address (if available)
• enrolled agent number (if available)

The IRS typically responds within 72 hours.

How much you’ll pay to have an enrolled agent prepare and file your tax return depends on several factors, such as:

• how many W-2 forms you have
• what types of income you have
• whether you itemize or claim the Standard Deduction
• whether you have capital gains or losses
• how many tax forms and schedules need to be completed

So, basically, the more complicated your tax situation, the more time and expertise will be required from the enrolled agent – which leads to a higher fee.

The cost of tax preparation services can also vary based on your geographic location. For instance, enrolled agents in urban areas or major cities tend to charge more when compared to those in rural areas.

The time of year you hire an enrolled agent can also affect the cost. During the peak tax season (January to April), enrolled agents may charge higher fees due to the increase in demand for their services.

The enrolled agent’s experience and qualifications can also impact the cost. An enrolled agent with several years of experience and specialized knowledge in a specific tax area will likely cost more than a less seasoned tax pro.

Some enrolled agents may offer additional services – such as tax planning or bookkeeping – that can increase the overall cost of tax preparation. Adding on your state tax return can boost the price as well.

The method of tax preparation can impact the cost, too. For instance, in-person tax preparation might be more expensive than virtual or online services.

Even the size of the enrolled agent's firm can affect the amount you’ll pay. Larger firms with more resources and overhead costs typically charge higher fees compared to smaller, independent agents.

There can be other reasons for a higher or lower fee. So, it’s often hard to predict the amount you’ll pay until you speak with an enrolled agent you’re thinking about hiring.

Enrolled agents can get paid to prepare a tax return in several different ways.

Some enrolled agents charge an hourly fee for their services. The hourly rate can vary depending on the complexity of your return and the enrolled agent’s experience.

Other enrolled agents charge a flat fee for preparing a tax return. However, again, the fee for a more complicated return can be higher than the fee for a simple return. Plus, there will usually be an additional fee for any added services.

In some cases, an enrolled agent may charge a retainer fee for their services. This means you pay a certain amount upfront, and the enrolled agent deducts their fee from this amount.

A combination of fee structures can be used, too. For example, an enrolled agent might charge a flat fee to file your tax return, but charge by the hour for any additional services.

Ultimately, the method of payment will depend on the enrolled agent's preferences and the agreement reached with you. It is important for clients to discuss the fee structure with a tax professional before engaging their services to avoid any misunderstandings.

Before hiring any tax professional, it’s a good idea to schedule an initial consultation with them. At this meeting, you can ask them any number of questions about your tax situation and their practice.

You’ll certainly want to ask about fees. However, this is also your chance to bring up any other question you might have. For example, you can ask:

• Does the enrolled agent have experience handling cases similar to yours?
• Can the enrolled agent provide references or client testimonials?
• How will the enrolled agent support you if you receive an audit notice or face other IRS issues?
• What is the enrolled agent’s approach to tax planning and strategies?
• What kind of documentation will the enrolled agent need to manage your taxes effectively?
• How will the enrolled agent keep your information secure?