Enrolled agents are a source of invaluable peace of mind for the savvy consumers who rely on their services at tax time. The only federally licensed tax practitioners, these accounting professionals can aid individuals and companies in matters of tax planning, tax compliance and tax preparation.
What Does an Enrolled Agent Do?
With a history of service that dates all the way back to 1884 when a flurry of dubious claims for Civil War losses led Congress to set standards for who was allowed to represent citizens before the U.S. Treasury Department, enrolled agents specialize in tax issues. Their familiarity with local, state and federal tax codes allows enrolled agents to answer questions about taxes, advise their clients regarding sole proprietorships, partnerships, corporations and other legal entities, prepare annual tax returns for individuals and businesses, and represent their client before the Internal Revenue Service. This distinction is especially important to anyone who considers the prospect of an IRS audit nightmarish. Anyone can prepare a tax return, but only an elite set of professionals can legally represent their clients in all matters with the IRS. Enrolled agents, along with certified public accountants and lawyers, can provide this service.
How Does an Accounting Professional Become an Enrolled Agent?
While there are no formal experience or education requirements to become an enrolled agent, these professionals are required to know the subject of taxation forward and backward. In order to obtain their licenses, they must demonstrate their expertise in taxation to the famously uncompromising IRS. As the IRS explains, all aspiring enrolled agents must apply for a Preparer Tax Identification Number and pass a background check that confirms their personal tax filings are all in proper compliance. Most applicants must also pass the three-part Special Enrollment Exam. This multiple-choice exam covers taxation issues for individuals and businesses, as well as matters related to representation, practice and procedure. By virtue of their professional experience, certain current or past IRS employees may be able to shortcut the process and skip the exam if they have a minimum of five years professional experience in a job or jobs that required them to frequently work with the tax code.
How Does An Enrolled Agent Differ From a Certified Public Accountant?
While both enrolled agents and certified public accountants are licensed professionals who can assist consumers with tax issues, there are several differences between them. Enrolled agents focus solely on taxation and are licensed by the federal government. By comparison, certified public accountants, who can specialize in taxation, another area of accounting, or work as generalists and offer services in a variety of financial areas, are licensed by the state they practice in. Enrolled agents do not have to meet any experience or educational requirements; they earn their licensure by demonstrating their expertise by passing the IRS’s Special Enrollment Exam. To earn their license, certified public accountants must fulfill “the three E’s” by meeting specific standards for experience and education standards and passing the Uniform CPA Exam. Both groups are expected to meet continuing education requirements to maintain their licensure. The IRS requires enrolled agents to complete 72 hours of continuing education every three years; the National Association of Enrolled Agents insists it members complete 30 hours each year to retain their membership. Continuing education requirements for certified public accountants are set by the state that licensed them.
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With their IRS-tested tax expertise, enrolled agents can be an excellent choice for those hunting for top-quality tax advice. People interested in consulting with one of these professionals can visit the National Association of Enrolled Agents’ online referral service to locate an enrolled agent in their area.