Enrolled Agent vs CPA
What is an Enrolled Agent?
When it comes time for most people to start looking for someone to help them prepare their taxes, a vast majority of them believe that they have two choices, an accountant (whether a CPA or not) and what are often self-proclaimed “tax preparers.” And while these might be two very viable options, they are not the only, nor may they be the best choices.
For most people, an accountant is probably a matter of overkill. There are obviously circumstances where the knowledge and experience of an accountant are certainly warranted, but these are not very common, especially when you consider other options. These circumstances might include complicated tax situations involving corporations and other similar business entities.
Even in these cases, it is important to understand that just because a person calls himself an accountant, doesn’t necessarily mean a lot. It is only when a person carries the credentials of a Certified Public Accountant can you be assured that he or she has not only taken a prescribed course of study that involves extensive accounting theory, taxation, and business law, but has also passed a comprehensive examination in these topics as well as completed a hands-on period of practice prior to being licensed. The trouble with hiring a CPA for most tax filings is that you will often pay for a lot of experience that you simply don’t need. For example, hiring a CPA to complete a simple tax form is much like hiring a brain surgeon to apply a Band-Aid to a child’s skinned knee.
At the other end of the spectrum is the tax preparer. Someone who offers their services as a tax preparer could be just about anything in terms of experience and education. They could have started offering their services after completing a simple course in tax preparation, but this is often of very limited value. It is also worth noting that an unlicensed tax preparer is not allowed to represent their client in front of the IRS in the case of an audit.
A third option that most people are not even aware of, but is often the best choice is what is called an “Enrolled Agent,” which is a person who has completed a comprehensive course of study in taxation and are licensed by a federal government to help taxpayers complete their taxes. It is because of this combination of education and licensing that unlike a tax preparer, an Enrolled Agent is allowed to represent their client before the IRS as well as state tax agencies.
Enrolled agents are not attorneys or CPAs, but in certain cases they have more extensive knowledge as well as experience in dealing with taxes and helping taxpayers than these other professionals. It is also important for taxpayers to know that because Enrolled Agents are not attorneys or CPAs, they do not often charge as much for their services as others do, but in many cases the work that is done is of a higher standard than these other professionals who might have much less actual tax experience.