Financial advisers and experts advertise their services every day. How can you tell which professional to hire for your IRS tax needs? Much of it depends on the specific kind of assistance you’re looking for. Ideally, you should choose a professional who is best qualified to handle your money matters. Often, that means hiring one of the following, a Certified Public Accountant (CPA) or an IRS Enrolled Agent (EA). But, how can you tell which one to choose for your financial needs?

Ultimately, choosing a good accountant is like choosing a doctor/lawyer/dentist/any other professional. A good tip is to get to know them and understand what they specialize in or like to do. This will greatly help with your choice! Above all, find a financial professional you can trust and rely on. They’re going to know a LOT about some very private details of your life.  Another good tip to help during your decision process is to pick an accountant the way you’d pick a spouse: think carefully, throw away subjective requirements, and go with what works best for YOU. You want to make sure they are competent, trustworthy, and charge a reasonable rate.

In the long run, you may prefer to establish a long-term relationship with your accountant, the best case would be to make sure you work with an EA or a CPA who works for themselves, rather than those who are employed by large corporations. With a self-employed professional, you’re far more likely to receive a higher level of customer service and to be able to speak to the same person each time you contact the agency.

What’s the difference between CPA and EA?

Most likely you’ll find Enrolled Agents and CPAs advertising in the same phone book or same internet space. Before deciding who would be the best person to hire to help prepare your tax return you should know the difference between them.

In short, a certified public accountant (CPA) is an expert in accounting. Tax matters are one of many specialties of CPAs. An enrolled agent (EA) is a tax practitioner who is authorized by the federal government. EAs are specifically skilled tax experts who are empowered to represent clients before the IRS and can handle matters concerning collections, appeals, and audits.

If you find yourself in a difficult tax situation, for out of court issues, an enrolled agent can represent you in court before the IRS. You can feel confident hiring an EA to file your tax return, as they usually have more experience. CPAs are capable of filing your return, however, their fee will most likely be significantly higher. An experienced EA will do the job with as much efficiency and skill.

Although, these are the simplified definitions. When choosing between a CPA and an EA, it may help to know about the requirements involved in their particular professions.

How does someone become a CPA?

On the path to becoming a certified public accountant, a CPA must first earn either a BS or a BA (and preferably in finance, accounting, administration or management). Because a CPA can only practice in the state in which they are licensed, they must first pick a state in which to get the license. The exam is the same, regardless of the state. It will consist of four sections and 1000 questions. After passing the exam, aspiring CPAs are required to meet certain practice requirements (interning with a CPA, etc).

THE FOUR SECTIONS OF A CPA EXAMINATION COVER:

• Auditing and Attestation (AUD). The nuts and bolts of the auditing process are covered in this section. Also covered are the standards applied to and the application of attestation.
• Business Environment and Concepts (BEC). This section covers business transactions and related accounting.
• Financial Accounting and Reporting (FAR). This section deals with the accounting principles for a wide variety of situations (business, non-profit and government).
• Regulation (REG). Ethics, professional responsibility, federal taxation, and business law are covered in this section.

If you want to do your homework and get more information on the specific list of the topics each CPA exam consists of, feel free to click here.

Obviously, the business life of a CPA is about much more than taxes and taxation. They are not usually considered to be tax experts, simply because their span of knowledge is much broader than taxes alone.

How does someone become an EA?

Enrolled Agents are the only tax professionals who get their license to practice directly from IRS and the United States Treasury.

There are two paths to becoming an EA. After working for the IRS for five years, an agent can become an EA without passing an examination. Without working for the IRS, one must pass a thorough background check and a three-part exam. To become an EA, an agent does not have to have any prior knowledge of tax form preparation. In fact, an EA may choose to never prepare a tax return. Enrolled agents specialize in their knowledge of the tax code and tax matters. An EA must know all of the nuts and bolts of income tax, gift tax, inheritance tax, estate tax, and payroll tax. The continuing professional education required for an EA is seventy-two hours every three years. Unlike a CPA whose continuing education will cover a wide range of accounting and tax matters, an EAs education will focus solely on taxation and tax ethics.

THE EXAMINATION REQUIRED FOR AN EA ARE:

• Part 1 – Individual. 100 questions exclusively on the tax code for individuals.
• Part 2 – Business. 100 questions exclusively on the tax code for business entities.
• Part 3 – Representation, Practice, and Procedures. 100 questions primarily on Circular 230, the Treasury Department guide for practicing before the IRS.

For more information on Enrolled Agents, their background and requirements, please view the Enrolled Agent Program directly from the IRS website.

When Enrolled Agents take their required continuing professional education (CPE), which consists of 72 hours every three years (more if they are NAEA members), it must be 100% in taxation and the ethics of taxation.

What is NAEA?

NAEA is the organization powering enrolled agents, also known as, America’s tax experts! They provide the networking, educational opportunities, programs, and services that enable enrolled agents, tax professionals and students to excel beyond their peers. Membership in NAEA is a key building block of success for enrolled agents and tax professionals seeking to provide the highest level of representation for their clients and for unlicensed preparers and CPAs thinking of advancing their careers by becoming enrolled agents.

Why NAEA recommend to use an Enrolled Agent?

Not all paid return tax practitioners are equal! The IRS chart below outlines the different levels of testing, continuing education requirements, unlimited representation rights and other criteria that you should know before hiring a tax professional.

Overview of Tax Return Preparer Requirements

The chart below provides an overview of the various categories of individuals who may prepare federal tax returns for compensation.

Category	PTIN	Tax Compliance Check	Background Check	IRS Test	Continuing Education	Practice Rights
Enrolled Agents*	Yes	Yes	Proposals Pending	Yes (Special Enrollment Exam)	72 hours every 3 years	Unlimited
CPAs**	Yes	Yes	Proposals Pending	No	Varies	Unlimited
Attorneys**	Yes	Yes	Proposals Pending	No	Varies	Unlimited
Supervised Preparers†	Yes	Yes	Proposals Pending	No	No	Limited
Non-1040 Preparers‡	Yes	Yes	Proposals Pending	No	No	Limited

*Enrolled Agents have passed a three-part, comprehensive IRS exam covering individual and business returns. They must adhere to ethical standards and complete 72 hours of continuing education courses every three years. EAs have unlimited practice rights before the IRS, which means they can represent clients for any tax matter.

**CPAs and Attorneys have unlimited practice rights before the IRS.

†To determine if you are a supervised preparer, view the fact sheet

‡ If you only prepare Forms 1040-PR and 1040-SS, you are considered a non-1040 preparer

Using an enrolled agent can save significant time and effort in tax preparation and its associated tasks. EAs are equipped to advise, represent, and prepare tax returns for individuals, partnerships, corporations, estates, trusts, and any entities with tax-reporting requirements.  EAs’ Continuing Education (CE) requirements ensure they have the knowledge to effectively represent taxpayers audited by the IRS despite the continually changing tax laws. In fact, EA members must fulfill continuing professional education requirements that exceed the IRS’ required minimum.

NAEA EAs provide two unique benefits to taxpayers.

Emphasis on Ethics – Their principal focus is an honest, intelligent and ethical representation of taxpayers before the governmental agencies. Their members adhere to a stringent Code of Ethics and Rules of Professional Conduct of the Association, as well as the Treasury Department’s Circular 230 regulations. In addition, their members belong to a strong network of experienced, well-trained tax professionals who work to make the tax code fair and reasonably enforced.

Proof of Expertise – Only enrolled agents are required to demonstrate to the IRS their competence in all areas of taxation, representation and ethics before they are given unlimited representation rights before IRS. Unlike attorneys and CPAs, who are state licensed and who may or may not choose to specialize in taxes, all enrolled agents specialize in taxation.

But which one is better for me, CPA or EA?

CPA any good?

Many people think that only a CPA is qualified to be a competent tax professional which is far from reality and is a false perception of the general public. While many CPAs have also become qualified as tax preparers, many have not. Most CPAs who are qualified tax preparers learned tax preparation after becoming a CPA.

“Certified Public Accountants” are accountants who have a degree in accounting, at least two years of work experience, and have passed the CPA exam. This is not an easy thing to do, so most CPAs are smart and capable professionals.

However, it might surprise you to learn that 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, their time is spent on tax preparation, with tax resolution making up only a fraction of their focus and experience.

Another different role that can be seen between a CPA and an EA, is that the former has the right to prepare and sign financial statements, whereas an EA does not enjoy this right that much. Unlike an EA, a Certified Public Accountant can do financial statement audits.

If your CPA is an audit/attest kind of person, please don’t be convinced that they’ll know everything about tax since if you don’t use it, you lose it, and the details of tax regulations change every year. Anyway, if your CPA is a tax specialist, you’re probably okay.  (What kind of tax specialist are they?  Personal tax?  Small biz?  State and local?  Sales/business?  International?  Corporate?  M&A specialist?)

CPAs typically charge more than EAs but that could vary depending on where they fall on the career continuum. An EA with many years of experience could charge more than a CPA who is in their first year or two in practice.

If you are in the habit of getting your bookkeeping done by a CPA, they offer a tax service, and they seem knowledgeable, it probably won’t hurt to have the CPA do your taxes.  They know all your financials anyway, and it’s easier to just have it all done by the same person.  For complicated, out-of-the-norm things, though, it might be better to tread with caution.  A CPA who does small business is probably good at things like personal taxes and small business tax compliance.  Any more than that and it depends on how up-to-date they are in their CPE, also known as Continuing Professional Education which is required for CPAs to maintain their professional competence and provide quality professional services. CPAs are responsible for complying with all applicable CPE requirements, rules and regulations of state boards of accountancy, as well as those of membership associations and other professional organizations.

EA any good?

As described earlier an enrolled agent is a federally licensed tax practitioner and is licensed by the IRS. You can’t get any clearer cut than that. An EA is authorized by the U.S. Department of the Treasury and has unlimited rights to represent taxpayers before the IRS for audits, collections, and appeals, according to the National Association of Enrolled Agents (NAEA).

EAs are considered tax specialists. They have a vast knowledge of anything that pertains to income tax, inheritance tax, gift tax, estate, payroll, retirement, and non-profit taxation. So, enrolled agents specialize in tax issues period.

An individual can become an EA if he has worked for the IRS for five years, or if he has taken the Special Enrolment Examination, which consists of a three-part comprehensive examination (Individuals, Businesses and Representation, Practice, and Procedure) which covers all aspects of the tax code. All EA candidates must pass a background check conducted by the IRS which includes looking into your personal tax history.

Still, it’s difficult to become an EA. EAs must either pass a two-day exam administered by the IRS or work for the IRS for five years. And, only 30 percent of those taking the test actually pass.

Why should you hire an enrolled agent? When a CPA is qualified to perform the duties of the EA!

Here, let me break it down for you:

A CPA has a wider role when compared to an EA. A Certified Public Accountant should have a vast knowledge of accounting, auditing, business law, personal finance, and taxes. Less than 25% of what you need to know to be a CPA is tax. On the contrary, an Enrolled Agent has to be knowledgeable about taxes, as this is the specialty area of an EA.

CPAs tend to be performing tax, accounting, and financial services to businesses. Not all specialize in taxation, and some specialize in more than one service. Enrolled Agents advise, represent and prepare tax returns for individuals, partnerships, corporations, estates, trusts and any entities with tax-reporting requirements, and many specialize in tax resolution.

Also, CPAs are not trained to be representing someone in a confrontational proceeding, such as negotiating a tax settlement with the IRS. This means that you should exercise care when considering a CPA for your tax debt relief needs. So, we do not recommend leaving it to someone who handles tax disputes on an irregular basis and is not trained on how to argue on someone else’s behalf.

In addition to an IRS-administered testing and application process, enrolled agents must complete at least 72 hours of continuing education every three years. It is the be-all and end-all of their existence. That said, there are EAs who specialize in things such as offer-in-compromise (OIC). While CPAs need 120 hours every three years, but that 120 hours can be in pretty much anything. (Though they do need to do 2 hours of ethics every year.) Most CPAs will probably do a tax updates CPE course, but it’s not required.  A CPA can choose to do zero tax and be just fine.

EAs aren’t required to know GAAP.  (Many do, anyway, because the obvious synergy between bookkeeping and taxes is really hard to ignore.  An EA doing business on their own usually has some sort of bookkeeping license or experience.)

In regards to the jurisdiction, a CPA falls under the state jurisdiction. A CPA may act only for taxpayers in the states specified by the jurisdiction. On the other hand, an EA can practice in any state.

Compared to CPAs, enrolled agents will generally charge fewer fees for their services. According to Payscale.com, enrolled agents typically make anywhere between $30,000-$75,000 a year, while CPAs make between $40,000-$104,000 annually.

Enrolled Agents are the only taxpayer representatives who receive their unlimited right to practice from the federal government. That means if you need to file in more than one state and eventually need representation before that state in an audit or resolution case, the same EA can do it

EAs rates tend to be more affordable, they can their tax law expertise to represent clients in tax proceedings, audit hearings and appeals for civil resolution cases just likes taxation attorney who rates way pricier.

EAs help ensures clients are treated appropriately by the IRS, work out payment plans on the best possible terms, and ensure the IRS follows laws that protect taxpayers.

But this is the first time I’ve heard of an EA. Should I really choose an EA to do my taxes?

While there are only 35,000 EAs compared to an estimated half-million CPAs and public accountants, EAs actually report to the government rather than a state board of accountancy. Given the reporting structure and the fact that EAs specialize in preparing tax returns, they may defend their clients before the Internal Revenue Service. Enrolled agents are becoming increasingly recognized in the tax business and their field continues to grow. The increasing needed number of EAs has risen in recent years as clients have begun to recognize their value and special skill set. these specialists are in such demand.

If your biggest worry comes at tax time, then an EA may be a better selection. Since Enrolled Agents are so well versed in the IRS tax code, they can advise you about how to avoid falling into common auditing traps and how to make sure that you are well prepared for possible tax issues in the coming year. Thus, enrolled agents are an excellent choice and can save you from paying the extra cost an attorney or CPA.

In other words, Enrolled Agents are the nation’s only solely dedicated tax professionals.

Side-by-side, it is obvious that an EA has more expertise in tax matters than a CPA. Yet, for whatever reason, most professionals still approach CPAs for tax advice. This may simply be that many people are not aware of the existence of EAs. They do exist, however, and they are the only federally authorized tax professionals. Also, it’s worth mentioning that the IRS itself recognizes EAs, not CPAs as tax experts.

Be wise. Seek tax advice from a tax professional and accounting help from an accountant.