What is an Enrolled Agent?

Most people are familiar with the designation CPA, but fewer know what an Enrolled Agent is, even though we can be traced back to the aftermath of the Civil War! In short, CPA’s specialize in accounting (although many do tax work) and EA’s specialize in tax (although many do accounting work).

Here is how the National Association of  Enrolled Agents (NAEA) describes Enrolled Agents:

Enrolled Agents (EAs) are America’s Tax Experts

Enrolled Agents (EAs) are federally-licensed tax practitioners who may represent taxpayers before the IRS when it comes to collections, audits and appeals. As authorized by the Department of Treasury’s Circular 230 regulations, EAs are granted unlimited practice rights to represent taxpayers before IRS and are authorized to advise, represent, and prepare tax returns for individuals, partnerships, corporations, estates, trusts, and any entities with tax-reporting requirements. Enrolled agents are the only federally-licensed tax practitioners who specialize in taxation and have unlimited rights to represent taxpayers before the IRS. The enrolled agent profession dates back to 1884 when, after questionable claims had been presented for Civil War losses, Congress acted to regulate persons who represented citizens in their dealings with the U.S. Treasury Department. Enrolled agents’ expertise in the continually changing field of taxation enables them to effectively represent taxpayers at all administrative levels within the IRS.

PRIVILEGE AND THE ENROLLED AGENT

The IRS Restructuring and Reform Act of 1998 provides federally-authorized practitioners (those bound by the Department of Treasury’s Circular 230 regulations) with 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.

CONTINUING EDUCATION

In addition to the stringent testing and application process, the IRS requires enrolled agents to complete 72 hours of continuing education every three years in order to maintain their active enrolled agent license and practice rights. Because of the expertise necessary to become an enrolled agent and the requirements to maintain the license, there are only about 53,700 practicing enrolled agents.

THE DIFFERENCES BETWEEN ENROLLED AGENTS AND OTHER TAX PROFESSIONALS

Only enrolled agents are required to demonstrate to the IRS their competence in all areas of taxation, representation and ethics before they are awarded unlimited representation rights to represent taxpayers before IRS. Unlike attorneys and CPAs, who are state-licensed and who may or may not choose to specialize in taxes, all enrolled agents specialize in taxation.

ETHICAL STANDARDS

Enrolled agents are required to abide by the provisions of the Department of Treasury’s Circular 230, which provides the regulations governing the practice of enrolled agents before the IRS.