An enrolled agent is someone who has earned the privilege of representing taxpayers before the IRS by passing a comprehensive IRS test covering personal and corporate income tax returns or by experience as a former employee of the IRS. Enrolled agent status is the highest accreditation issued by the IRS. People who achieve this elite status must adhere to ethical standards and complete 72 hours of continuing education courses every three years.
Enrolled agents, such as lawyers and certified public accountants (CPAs), have unlimited practice rights. This means that they have no restrictions on which taxpayers they can represent, the types of tax issues they can handle, and in which IRS offices they can represent their clients.
Why are enrolled agents more qualified than a lawyer or a CPA to resolve tax disputes?
Lawyers and accountants, licensed only at the state level, are trained to deal with legal and accounting matters, respectively, and cannot choose to specialize in taxation. Most attorneys and public accountants are not experienced in tax litigation (also known as tax relief). They have no experience working with the IRS and state tax authorities. Enrolled agents are the only tax professionals directly authorized by the IRS and are specifically accredited to resolve IRS tax disputes. Remaining an enrolled agent requires a continuing professional education requirement, with a full focus on federal taxes. What sets enrolled agents apart is that 100% of their annual continuing professional education must be related to federal tax matters; no other professional has the job of continuously demonstrating their skills to the IRS.
Under their federal license, enrolled agents are authorized by the IRS to represent individuals and corporations in all 50 states and territories of the United States. In addition, enrolled agents have unlimited practice rights and can represent individual and corporate collaborators at all levels of the IRS, including collections, audits, and appeals.
The difference between an enrolled agent and other tax professionals
Unlike other tax professionals, such as certified public accountants or tax lawyers, enrolled agents specialize in taxes, while others may or may not specialize in taxes. Enrolled agents are not employees of the IRS and may not use the term "certified" in the course of their work or any other relationship with the IRS.
Education is required to become an enrolled agent: None - A bachelor's or master's degree is not required to become an enrolled agent, but it is a requirement for other tax professionals (lawyers and accountants).
There are two ways to become an enrolled agent:
Pass a comprehensive tax exam (3) part exam covering personal and corporate taxes and IRS procedures.
Accumulate five years of work for the IRS in a tax specialization.
Continuing Education Requirements Enrolled agents must maintain a certain amount of continuing education credits throughout the year. According to Treasury Department Circular 230, an officer must have at least (72) hours of continuing education every (3) years with a minimum of (16) hours and a minimum of (2) hours devoted to ethics.
Why hire an enrolled agent?
Complexity: You have a complex tax situation that requires a special tax specialist to manage. Since enrolled agents focus on a specialty, taxation tends to have a deeper understanding and application of taxes.
Price: Hiring an enrolled agent is generally cheaper than hiring a CPA, and you can choose to have an enrolled agent to solve simple tax issues.
When would you not hire an enrolled agent?
If you own a business: As enrolled agents are strictly tax-focused, it is difficult to say their level of experience and knowledge of current accounting rules, business applications, budget support, etc., that enrolled agents can offer an entrepreneur. It may make more sense to turn to a CPA company because CPA companies focus on accounting and taxation and best business practices that are more integrated into the overall financial picture of your business.
Bottom Line
Enrolled agents are highly qualified, with technical knowledge and experience in tax matters. They can represent clients before the IRS and are often a great resource for their tax needs. The choice of the tax specialist depends on the objectives and the results desired by the individual /company.
Whichever route you choose, we strongly recommend that you find tax professionals who focus on your industry or work with others who have similar situations to yours.
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Karen Munoz, EA