If you’re looking to hire a professional tax preparer, hiring an enrolled agent for taxes instead of a certified public accountant can offer you a competitive advantage in managing your tax liability.
What are the Qualifications of a CPA Versus an Enrolled Agent?
You might already be familiar with CPAs, who people hire to manage their tax matters. These matters include preparing tax returns, as well as providing assurance services like financial audits and reports for companies. To become a CPA, a person must obtain a CPA license from the state. All states require CPAs to pass the Uniform CPA Exam, but each state has its own education and experience requirements to obtain and keep a CPA license. These state-specific requirements can widely vary.
By contrast, enrolled agents are licensed by the federal government through the U.S. Department of Treasury. It requires that EAs undergo a three-part comprehensive exam on all aspects of the federal tax code, including individual and business tax returns. Alternatively, the federal government may waive the exam for employees of the IRS, depending on their work position and length of employment. Upon obtaining their licenses, all EAs must also undergo a substantial amount of continuing education: 72 hours every three years, in addition to at least 16 hours each enrollment year. The latter must include some hours on ethics.
What Enrolled Agents Can Do that CPAs Cannot
EAs’ and CPAs’ licenses allow them to offer the same tax preparation services such as preparing tax returns, performing audits, advising on bookkeeping, etc. However, because of the vigorous vetting and continuing education requirements, enrolled agents can additionally provide their clients with two things:
Services in any state in the country.
Representation before the IRS in the event of an audit.
The Competitive Advantages of Using an Enrolled Agent For Taxes
1) No geographical limitations. The first apparent competitive advantage of using an enrolled agent for taxes is their ability to practice in any state. This quality is advantageous if you have businesses and assets in multiple states and/or need to file in more than one state. Using an EA to do filings in multiple states allows you to save time and effort in finding a different CPA for each state you need to file in. And, if you find an EA that you like and trust, you can rest assured that you can continue using their services no matter where you or they end up moving.
2) Cost. Another competitive advantage is cost. If CPAs in your local area charge high hourly rates, you’re likely to find more reasonably-priced services with EAs. For instance, you might find a tax preparation company using EAs would charge a flat rate instead of an hourly fee, or that the EA’s hourly fees are less than your local CPA’s. The services are the same, but EAs can charge decreased fees because there is less overhead. For instance, EAs can help you from anywhere in the country or they can be located in less expensive geographic locations.
3) Specialized knowledge of the federal tax code. EAs have specialized knowledge of the federal tax code. This is either accredited by the U.S. Department of Treasury through the examination or direct working experience with the IRS. The credentials and/or experience can better equip EAs with the language and tools necessary to prevent their clients from getting audited. That means less time and potential liability for you, the taxpayer.
4) Functionality. In the event an audit gets triggered, or if you ever run into tax trouble for other reasons, the U.S. Department of Treasury has EAs appear on their clients’ behalf to negotiate a settlement, conduct hearings, and manage appeals. Again, if you like and trust your EA, having them prepare your taxes and then defend you if you ever get into tax trouble can be a relief. Between this ability and an EA’s lack of geographical limitations, an EA can be a one-stop-shop for their clients for their various tax needs.
Takeaways On Using An Enrolled Agent For Taxes
Using the services of EAs has definite competitive advantages, with the main ones being cost and convenience. Because of their rigorous training and education requirements, and because the federal government manages their licensing, EA services maintain a minimum standard quality of excellence regardless of their geographic location.
If you’re looking for more information on the best, most efficient ways to complete your taxes, please contact Tax N Book today!