Certified public accountants (CPAs) who have been approved by the federal government to represent taxpayers in official IRS proceedings are known as enrolled agents (EAs).
If you’re facing an IRS collection, lien, appeal process, or audit, an EA may be able to advocate on your behalf as well as prepare your tax returns and advise you on your situation.
The title of “Enrolled Agent” has been recognized as a profession since 1884 and is authorized by the Circular 230 regulations of the Department of Treasury. EAs are required to maintain expertise in the ever-changing world of tax law. It is the highest professional credential awarded by the IRS.
Many former IRS agents obtain the credential and continue on to private practices, helping taxpayers with tax filings and tax debt relief.
The EA designation comes with unlimited practice rights, meaning these professionals can represent any type of taxpayer in any type of IRS or tax court proceeding for all tax matters.
Unlike financial attorneys and CPAs, who may or may not specialize in taxation, every EA must demonstrate comprehensive knowledge of tax law, representing taxpayers before the IRS and associated ethical provisions. CPAs and attorneys are licensed by the state, but EAs must maintain federal licensure. CPAs also have the power to represent taxpayers before the IRS, but they don’t necessarily have the same specialized tax background required of an EA.
Although some CPAs and tax attorneys become EAs, CPAs and tax attorneys don’t need to meet the same educational requirements or have the same level of experience as IRS Enrolled Agents.
EAs must pass a three-part test administered by the IRS. You can take the test in any order, but must pass all three parts within a two-year time span. The three parts are:
Representation, Practices and Procedure
To understand the depth and breadth of an EA’s knowledge, let’s look a bit further into what each aspect of the test entails.
Part 1 – Individuals
This portion of the test covers everything IRS enrolled agents need to know about taxes for individuals. Students preparing for the test will delve into taxpayer data, and then cover income and assets, deductions and credits, taxation and device, and specialized returns for individuals. Each part of the test is weighted differently, with Income and Assets and Deduction and Credits, together, counting toward 50% of the total Part 1 score.
Part 2 – Businesses
The business portion of the test, typically considered the most difficult, is divided into three sections: Businesses, Business Financial Information, and Specialized Returns and Taxpayers. The sections count for 45%, 40%, and 15% of the total grade for Part 2, respectively.
Part 3 – Representation, Practices and Procedure
The third part of the test covers best practices and common procedures, representing clients before the IRS, registration, and tax filings. Practices and Procedures is the most significant portion of the test, making up 33% of the final grade, followed by Representation before the IRS (25%), Specific Types of Registration (25%), and Completion of the Filing Process (17%).
In addition to passing the extensive exam, an enrolled agent is required to pass an IRS background check. He or she must have a tax history that is free of delinquency. All overdue tax returns and past-due balances must be paid in full to obtain EA status. Individuals who have a felony conviction related to breach of trust or dishonesty within the past 10 years are not EA-eligible. [Good!]
The cost of becoming an EA includes a $50 fee to register for a preparer taxpayer identification number (PTIN), a total cost of about $340 to take the exam, and the price of ongoing continuing education courses and license renewal, which must occur every three years.
EAs must renew their licenses every three years. A condition of renewal is the completion of at least 72 continuing education hours. Professionals who are also certified by the National Association of Enrolled Agents (NAEA) must complete an additional 30 continuing education hours to maintain certification. These courses must be approved by the IRS. These requirements are so stringent that only about 53,000 tax professionals are admitted to practice as EAs.
NAEA members agree to abide by the professional association’s Code of Ethics and Rules of Professional Conduct.
Situations in which you may want to hire an enrolled agent include the following:
Although an individual doesn’t necessarily need to be an EA or CPA to prepare your tax return, an EA will most likely have the most in-depth IRS expertise to offer you the most favorable outcome. This can include reducing your overall tax liability with the right deductions, avoiding an audit, and even providing tax advice that will help you financially over time.
While tax preparers in recent years have undergone increased oversight and scrutiny, an IRS enrolled agent has proven to have the knowledge and experience to help you achieve the best outcome, regardless of your current tax situation.
When people visit a lawyer, they benefit from something called client-attorney privilege, which means the attorney must keep the details of your case and anything you reveal confidential. Of course, they can speak on your behalf during a trial, but if you reveal information that is not in your best interests, they are not required to share it.
Similarly, taxpayers working with an enrolled agent enjoy limited client privilege under the IRS Restructuring and Reform Act of 1998. When you are involved in an audit or collection action with the IRS, the EA is required to keep any information you share confidential. This privilege does not apply when an EA simply prepares your tax return, however. It is also not valid at the state level, although some states have their own versions of this provision.
Receiving a notice from the IRS can be upsetting, especially if you owe past-due taxes you can’t afford to pay. Hiring an Enrolled Agent could be your best move to assist with tax debt relief.
Follow these steps if you are facing unpaid tax debt.
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