What is an Enrolled Agent?
Perhaps the most common question I get from clients is, “What’s an Enrolled Agent?” Which is understandable, because it’s not a professional credential that’s seen as often in the media and public life. It is, however, the most advanced credential available that’s specific to the field of taxation and IRS representation.
An Enrolled Agent is a tax practitioner who is licensed by the federal government to practice and represent clients before the IRS, by completing a comprehensive series of detailed exams on all major topics of taxation. They have the same representation rights before the IRS as CPAs and attorneys do. One of the major differences, though is that Enrolled Agents are tax professionals first and foremost. So, for example, while a CPA will do many hours of continuing education per year, only a fraction of it may involve taxation (California, for example, requires CPAs to have education in “technical” subject areas, but has no specific minimum amount of hours that have to be in taxation, according to NASBA). Enrolled Agents, in contrast, are required to spend their education hours in topics directly related to taxation, ethical obligations of tax practice, and securing taxpayer documents and personal information. When it comes to taxes, an Enrolled Agent is the tax professional you can turn to for the most comprehensive and up-to-date knowledge of tax issues.
Additionally, unlike CPAs (which are licensed on a state-by-state basis with varying requirements and obligations), Enrolled Agents are designated on the national level, and can practice in any state. This also means that no matter where in the U.S. you are, you can be sure that an Enrolled Agent is committed to the same rules and ethical standards, and has the same education requirements to ensure their professional expertise.
Interested in a bit more of the history and benefits of Enrolled Agents? The following information below, from the National Association of Enrolled Agents, goes into how the program came about and provides some more in-depth information about the program regulations.
How did the Enrolled Agent program come about?
After the Civil War, many citizens had problems settling claims with the government for horses and other property confiscated for use in the war effort. After many petitions and much pleading, Congress, in 1884, endowed enrolled agents with the power of advocacy to prepare claims against the government and to seek equitable justice for the citizenry. For many years, the purpose of the enrolled agent was to act in this capacity.
In 1913, when the income tax was passed, the job of the enrolled agent was expanded to include claims for monetary relief for citizens whose taxes had become inequitable. As the income tax, estate, gift and other sources of tax collections became more complex, the role of the enrolled agent increased to include the preparation of the many tax forms that were required. Additionally, as audits became more prevalent, their role evolved into taxpayer advocacy and negotiating with the Internal Revenue Service on behalf of their clients.
How can an EA help me?
Enrolled agents advise, represent, and prepare tax returns for individuals, partnerships, corporations, estates, trusts, and any entities with tax-reporting requirements. The expertise of EAs in the continuously changing field of taxation enables them to effectively represent taxpayers audited by the IRS.
Privilege and the Enrolled Agent
The IRS Restructuring and Reform Act of 1998 allow federally authorized practitioners (those bound by U.S. Department of the Treasury Circular 230 regulations) a limited client privilege. This privilege allows confidentiality between the taxpayer and the enrolled agent under certain conditions. The privilege applies to situations in which the taxpayer is being represented in cases involving audits and collection matters. It is not applicable to the preparation and filing of a tax return. This privilege does not apply to state tax matters, although a number of states have an accountant-client privilege.
Are enrolled agents required to take continuing professional education?
In addition to the stringent testing and application process, the IRS requires enrolled agents to complete 72 hours of continuing professional education, reported every three years, to maintain their EA status. NAEA members are obligated to complete 90 hours per three-year reporting period. Because of the knowledge necessary to become an EA and the requirements to maintain the license, there are only about 40,000 practicing EAs.
What are the differences between enrolled agents and other tax professionals?
Only EAs are required to demonstrate to the IRS their competence in matters of taxation before they may represent a taxpayer before the IRS. Unlike attorneys and CPAs, who may or may not choose to specialize in taxes, all EAs specialize in taxation. EAs are the only taxpayer representatives who receive their right to practice from the U.S. government (CPAs and attorneys are licensed by the states).
Are enrolled agents bound by standards?
Enrolled agents are required to abide by the provisions of U.S. Department of the Treasury Circular 230, which provides the regulations governing the practice of EAs before the IRS.