It’s my annual “Taxes from A to Z” series! If you’re wondering whether you can claim home office expenses or whether to deduct a capital loss, you won’t want to miss a single letter.
E is for Enrolled Agent.
When you’re looking for a tax professional, sorting through the acronyms, titles and qualifications can be confusing. Many taxpayers have heard of a CPA – even if they’re not 100% sure what it is that a CPA does – but some other designations may fly under the radar. One designation that is attracting more attention in recent years is Enrolled Agent (EA).
Unlike a CPA or an attorney (more on those later) licensed by the state, an EA earns the privilege of representing taxpayers before the Internal Revenue Service (IRS) by either passing a three-part comprehensive IRS test covering individual and business tax returns or through experience as a former IRS employee. Enrolled agent status is the highest credential awarded by the IRS. EAs must adhere to ethical standards and complete 72 hours of continuing education (CE) courses every three years; a minimum of 16 hours of CE must be earned per year, two of which must be on ethics.
EAs, like attorneys and CPAs, have unlimited practice rights before the IRS. This means they are unrestricted as to which taxpayers they can represent, what types of tax matters they can handle, and which IRS offices they can represent clients before.
Since EAs are licensed by the IRS, there is no state repository to check qualifications. To verify whether someone is an enrolled agent, email email@example.com and include the following information:
- First and Last Name
- Complete Address (if available)
- Enrolled Agent Number (if available)
You can also check the Preparer Tax Identification Number (PTIN) directory on the IRS website for EAs, as well as other tax preparers who currently hold professional credentials recognized by the IRS or those who hold an Annual Filing Season Program Record of Completion.
EAs may choose to become a member of the National Association of Enrolled Agents (NAEA). The NAEA requirements for membership exceed IRS standards: members, associates, and academic associates must complete 30 hours of CE per year.
EAs are one group of tax professionals. Also in the alphabet soup?
A certified financial planner (CFP) is a designation for financial planners given by the Certified Financial Planner Board of Standards. A CFP must meet certain education requirements, pass an exam, have experience in the field, pass fitness standards and pay a certification fee: the coursework and exam have tax and tax planning components as determined by the Board. A CFP may have tax experience but tax may not necessarily be the focus of their practice.
A certified public accountant (CPA) is certified by the state to act as a public accountant. All CPAs are accountants, but not all accountants are CPAs. To qualify as a CPA, candidates are required to pass an exam. Most states also require an ethics exam or course as well as continuing education credits. A CPA may specialize in tax but there’s a wide range of CPA services including accounting, auditing, financial planning, technology consulting, and business valuation.
Annual Filing Season Program (AFSP) participants are non-credentialed return preparers who have met voluntary requirements established by IRS. Those requirements include 18 hours of continuing education, (includes a six-hour federal tax law refresher course with an exam). AFSP participants who have met the criteria receive a Record of Completion and are included in a public database of return preparers on the IRS website.
A Juris Doctor (JD) is a law degree. Having a JD means that you’ve graduated from law school but does not always mean you’ve passed the bar exam. An LLM (Master of Laws) is an additional law degree, almost like a specialty (though ethics rules in many states won’t allow lawyers to call it that). An LLM could be focused on taxation but may not be (you could have an LLM in Trial Advocacy, for example). A lawyer is required to pass an exam, an ethics exam or course, and take continuing education credits. Having a law degree or two doesn’t necessarily mean that an attorney prepares returns or has tax experience (you don’t have to demonstrate competence in tax law to pass the bar in most states).
A Volunteer Income Tax Assistance (VITA) volunteer is trained by the IRS to prepare basic returns.
Other accountants, bookkeepers, and tax preparers may be able to demonstrate competence but may not have formal credentials. Always ask questions about what a tax pro does – and why they’re qualified to do it – before retaining their services.
For your taxes from A to Z, here’s the rest of the series: