When choosing a professional to work with for my accounting, bookkeeping, and/or tax preparation, what I am looking for? Which designated professional would I choose? What are the differences between the two designations?
When it comes to taxes, accounting, and/or bookkeeping, the choice to hire a CPA or Enrolled Agent can be confusing. By understanding the certain accreditations is key if you're making a decision to hire a professional to guide you through your needs. Both certifications have significant expertise, the choice between them will come down to your personal needs.
What is a Certified Public Accountant (CPA)?
CPAs are trained in a broad range of topics related to accounting. CPAs have flexible and expansive knowledge in topics that include auditing, business law, finance, and taxes. CPAs are certified after successfully passing four parts of the standardized CPA exam, made up of Auditing & Attestation, Business Environment & Concepts, Financial Accounting & Reporting, and Regulation. CPAs are licensed and practice in the state in which they were licensed.
CPAs typically do most of their work for public accounting firms of all sizes, licensed as auditors, financial planners, corporate & executive accountants, and tax consultants. CPAs can assist in all accounting, tax and financial services for businesses, individuals, and other organizations they may represent. CPAs help clients set and achieve financial goals through money management and financial planning.
What is an Enrolled Agent (EA)?
EAs are professionals who focus narrowly on managing tax arrangements for individuals, businesses or private entities. EAs are federally licensed tax specialists after successfully passing three parts of the Special Enrollment Examination that covers all parts of the tax code. A professional can bypass the exam if they have worked for the IRS for five years, during which they would have encountered comprehensive engagement with all aspects of the tax code as part their job. EAs are licensed at the federal level, and the federal government recognizes them as tax specialists.
EAs typically represent individuals and business clients in tax audits, tax appeals, and tax collections. EAs can also provide tax advice, tax filing, and more. EAs can help with revolve out-of-state issues and tax returns. You may also retain an EA if you are attempting to resolve an IRS dispute through a civil resolution case, tax proceedings, appeals, and audit hearings. EAs will have knowledge of anything that revolves around income tax, inheritance tax, gift tax, estate, payroll, retirement, and non-profit taxation.
Similarities Between CPAs and EAs
Both CPAs and EAs enjoy virtually unlimited practice rights before the IRS. That means there are no restrictions to the types of tax issues they can handle and the type of taxpayers they can service. Additionally, both CPAs and EAs may represent tax clients before any type of IRS of entity. (Only Tax Attorneys can represent clients before Tax Court). CPAs and EAs both perform bookkeeping services that could be useful for business when preparing tax returns. Both can help you organize and stay on track for the coming year. Lastly, EAs and CPAs are required to meet specific ethical and continuing education requirements.
Differences Between CPAs and EAs
While both CPAs and EAs have expertise in taxes, the requirements to achieve these credentials is different, as discussed above. Range of services offered are slightly different between CPAs and EAs. CPAs are licensed at the state level, whereas EAs are licensed at the federal level. CPAs are licensed on a state-by-state basis and are also empowered by the Department of Treasury to represent taxpayers before the IRS. EAs are recognized across all 50 states.
CPAs' strongest abilities are to attest an IRS audit, making sure that it was handled fairly and truthfully. EAs' strongest abilities are to ensure their clients are getting treated fairly by the IRS and work out payment plans on the best possible terms for clients in tax proceedings, appeals and audit hearings while representing. If you have a business with micro-focus, working with an EA could be the perfect fit for you. If you are interested in accounting practices that have nothing to do with taxes, such as auditing, then a CPA option may be best.
If you have any questions about the similarities or difference between CPAs or EAs, please feel free to contact us regarding any questions. We are here to help!
Holly Conner
Enrolled Agent