For small business owners, tax season is a challenging time due to the myriad of laws and regulations they must comply with. To prevent any potential mistakes, fines, or penalties, it is important that you consider asking for help from an expert. In the realm of tax planning strategies, Certified Public Accountants (CPAs) and Enrolled Agents provide that expertise. However, what distinguishes these professionals, and how will you know which one fits the bill to cater for your tax needs? Here in this ultimate guide, we will go deep into the separate roles, skills and advantages of Certified Public Accountants (CPAs) and Enrolled Agents (EAs), which should allow individuals as well as business proprietors to seem out for the both and deal with their taxes properly.
EAs and CPAs
If you do decide that employing a tax professional seems to be the secure way of going through everything, then you better find someone who knows what they are doing and in whom your personal information can be trusted.
The 2 most prominent tax professionals you will come across are:
- Enrolled Agents (EAs)
- Certified Public Accountants (CPAs)
Both are tax professionals. The jobs of an EA and a CPA often overlap. However, there are many clear differences when comparing an EA to a CPA. To understand the difference between EA and CPA, it is helpful to first look at what these two professionals do on a daily basis.
What is the definition of an enrolled agent?
EAs are federal tax practitioners who have technical expertise in the field of taxation and can represent people against the IRS for a myriad of tax issues, such as collections, audits from the IRS, and appeals. No restrictions exist on who they can be an agent for or visit which IRS office.
Furthermore, EAs frequently:
Prepare and file tax returns for clients with required filings, which include corporations in addition to individuals, trusts, partnerships and estates.
Assist with Tax Prep
In general, an applicant needs to pass a three-part test, apply for enrollment with the IRS, and clear a background check (including checking past tax compliances) in order to become an EA. A number of IRS employees are exempt from taking the exam because they worked at the tax agency beforehand.
To maintain the EA designation, they must,
- Follow the ethical guidelines set by the U.S. Department of Treasury
- Continuous education for every 72 hours for three years.
- The National Association of Enrolled Agents is a membership organization that includes many EAs, and it has its own code of ethics.
What is a CPA (certified public accountant)?
CPA is the title of qualified accountants in the United States who have passed a comprehensive exam and are state-licensed to practice accounting. A licensed CPA will be able to represent clients before the IRS as well—just like EAs.
There are many different types of jobs that a CPA can do, and they work in all sorts of areas to help clients. For instance, they may be:
- Executive / corporate accountant
- Auditor
- Forensic accountant
- Tax accountant
- Financial advisor
- Business consultant
CPA Candidates have to fulfill education and experience requirements, as well as pass all four sections of the examination with a certain score. The test is the same across all states, but each state has its own requirements for education and/or work experience. Most states require a bachelor’s degree and experience in public accounting under the guidance of a CPA.
CPAs receive their licenses from the state’s board of accounting after meeting all necessary requirements. What is even more, every state has its own rules with respect to keeping a license valid, but most require at least forty hours of continuing education per year.
As a CPA, there are also the ethical standards in each state as laid out by their respective boards of accountants. Moreover, ethics is often a required portion of multiple continuing education exam hours.
Many licensed CPAs are also members of the American Institute of Certified Public Accountants (AICPA), which has its own Code of Professional Conduct.
How Do EAs and CPAs Differ?
Despite some overlap, the biggest difference between EAs and CPAs is their work environment. Both careers demand a thorough understanding of financial regulations and accounting principles. Moreover, both are able to help in preparing tax returns for individuals and businesses, which also include other services related to customizing taxes.
However, an EA is only able to do tax work, while a CPA can perform many other types of financial duties. While bookkeepers are responsible for the day-to-day accounting, CPAs can accomplish bigger tasks such as consulting and audits. They may also need to provide advice about financial issues with new clients or business organizations.
On the other hand, enrolled agents (EAs) are considered experts in taxes. They also have a great knowledge of the tax code and can help people or businesses with their way through them.
An average day at work consists of the following:
The daily experience of an EA or a CPA will change depending on the size and type of order they are supporting. EA’s vs. CPAS While CPAs likely have complex audits or financial consulting projects to work on, EAs often prepare taxes at the individual level.
If EAs can pick up their own clients quickly, it means they are able to set their terms of engagements. They can choose to work in their office between the regular business hours, or they may have to visit clients’ residences and offices providing tax-related services.
CPAs generally have set hours and can work in a traditional office setting at a public accounting firm or corporation. Similar to EAs, they can set up their own practice to handle a private clientele.
Responsibilities and duties
EAs should be expected to have a detailed knowledge of the IRS rules and regulations as well as an in-depth understanding of federal tax codes along with most state-level taxation. They need to analyze financial data, identify tax issues clients might face, and consult on how these problems can be solved. In addition, EAs must be able to argue for clients with the IRS and other governmental tillage.
CPAs also have responsibilities that are bigger than just filing tax returns. They should be able to analyze financial data, prepare budgets and check short-term or long-term investments of the organization, etc. They guide corporate governance for an entity in addition to designing strategies for how the company makes a profit more efficiently. Moreover, CPAs may specialize in company audits.
Job Prospects and Salary
The best part is that both EAs and CPAs should expect to have a promising career in the accounting sector. EAs earn an average salary of about $59,000 per year. That figure stands in for the base pay, exclusive of commissions, tips and profit sharing.
Average: $82,000 per year (for CPAs) Unlike EAs, the figure does not include other types of remuneration.
In terms of employment, both are likely to witness a huge surge in the next ten years. But the need for CPAs simply outweighs that. There are many different reasons why a person or corporation would need a CPA, but if the client needs to have certain tax-related services performed, then an EA should be hired instead.
How Do I Verify an EA or CPA?
So, before you hire an EA or CPA, really know their qualifications. This is not a difficult undertaking, which also acts to be promising.
The identity verification of an EA can be validated through the IRS via email to [email protected]. Incorporate the EA’s:
- First and last name
- Full address (if available)
- EA (if applicable)
- Most of the time, they will respond within 72 hours.
In order to verify whether a CPA is actually qualified and fully licensed, check the Board of Accountancy in the state where the CPA practices. Additionally, you can look for EAs and CPAs with IRS-recognized credentials by searching the IRS’s online directory of tax return preparers.
Similarly, find out if an EA is part of the NAEA or a CPA is a member of either AICPA or their state-specific society (such as CalCPA for California-based CPAs). Though not an absolute, these memberships can often be a positive clue as to their commitment to professional standards.
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Author Bio:
Velan bookkeeping with 18 years of experience as an outsourced bookkeeping services provider, offers Cloud Accounting and Bookkeeping, AR/AP, Payroll, and Controller services for various industry verticals. We cater to all types of clients, right from small businesses, CPA firms to Fortune 500 companies spread across the USA.
As the editor of the blog, She curate insightful content that sparks curiosity and fosters learning. With a passion for storytelling and a keen eye for detail, she strive to bring diverse perspectives and engaging narratives to readers, ensuring every piece informs, inspires, and enriches.
