There was a brief moment in college that I considered becoming a CPA – that is until I took Business Tax – yikes! While I lost the desire to become a CPA, I never questioned their importance. Having a good CPA is essential in having a successful business as mine has been there every step of the way. It also makes sense for many families to have a CPA to help them navigate through the ever evolving tax code.
Then one day I was introduced to the title Enrolled Agent and, I have to admit, I had no clue what it meant. I knew what a CPA was, but did not know the difference between a CPA and an Enrolled Agent.
What is an Enrolled Agent?
An Enrolled Agent (EA) is a tax practitioner authorized by the United States federal government to represent tax payers in affairs with the Internal Revenue Service (IRS). The United States Department of Treasury empowers EAs to represent taxpayers for any audits, appeals or collections. This occupation is and has been regulated by Congress since 1884. It was originally established to investigate questionable and fraudulent claims that were submitted in the wake of the Civil War. Congress decided to regulate persons who were given the task of representing citizens in affairs with the United States Treasury.
How Do You Become An Enrolled Agent?
In order to become an enrolled agent, you must pass the Special Enrollment Examination or be able to provide enough documentation to show that your experience qualifies you for this position. The applicant will have to pass an extensive background examination that includes investigation of the applicant’s tax history. The examination is comprehensive and covers all facets of the tax code.
What Does the Enrolled Agent Do?
Enrolled agents are given the authority to prepare tax returns, advise and represent individuals, estates, corporations, partnerships and trusts. EAs are experts who keep up with the ever changing area of taxation. EAs are therefore effectively able to represent persons who are audited by the IRS. EAs are required to show they are competent in tax laws before they can represent a tax payer before the IRS. EAs receive their license from the federal government while Certified Public Accountants and attorneys are usually licensed by the state in which they reside.
Certified Public Accountant (CPA)
A Certified Public Accountant (CPA) is a person who is extremely knowledgeable in accounting practices and applications and is able to apply laws and regulations in practice.
How Do You Become A CPA?
Becoming a CPA requires passing a state exam and sustaining continuing education requirements throughout your profession. Many states have their own boards of accounting/accountancy that control the issuing of the CPA license. Qualifying in one state does not automatically mean that you are qualified to practice in another state.
The continuing education classes often require 120 hours of class time every three years through class room attendance, web seminars or online courses. Usually the minimum is 20 hours a year. Many states also require an ethics course to be taken for the renewal of a license.
What Does A CPA Do?
Many CPAs will prepare individual and business tax returns. They will attest to the truthfulness of disclosures made in tax statements and adhere to current tax laws. My CPA was instrumental in helping me in my transition from W-2 employee to the realm of the self-employed. I rely on him for many aspects for my business.
CPAs can work in finance fields such as:
- Corporate finance
- Estate planning
- Government affairs
- Financial planning
- Income tax
- Information technology as applied to finances in a business
- Tax preparation
CPAs are also commonly employed in large corporations as Chief Financial Officers or Chief Economic Officers. These CPAs represent the corporation and apply their business knowledge to the businesses financial needs. They do not offer services directly to the public, such as preparing tax statements.