Although both a certified public accountant (CPA) and an enrolled agent (EA) can prepare your taxes and perform various related services, there are multiple differences between these two types of financial professionals. It is important to understand the benefits and limitations (if any) of using either type for your tax and/or accounting needs. Here is more in-depth information on each of these tax professionals:
What is a Certified Public Accountant (CPA)?
A CPA, or Certified Public Accountant, is a professional designation that allows the professional to deal with many different aspects of financial services, primarily financial audit services. CPAs look deeply into the financial equation, evaluate numbers, create projections and try to provide an overall picture, forecast, and recommendations based on internal and historical data.
For tax purposes, a CPA’s main differentiator is the ability to attest an audit, which means it affirms to the IRS that financial statements are truthful. To accomplish that, a CPA will request bank statements and other proof, which limits the possibility of mistakes.
Another main distinction, and potential downside is that CPAs can only work in the state(s) in which they are licensed. EAs, meanwhile, are federally licensed and can work in all 50 states.
What are the Additional Advantages of Using a CPA?
- A CPA can perform financial statement audits.
- A CPA has the right to prepare and sign financial statements
- CPAs have a broad knowledge of accounting, auditing, business law, personal finance, and taxes.
What is an Enrolled Agent (EA)?
Enrolled Agents advise, represent and prepare tax returns for individuals, partnerships, corporations, estates, trusts and any entities with tax-reporting requirements. They are the only federally licensed tax practitioners who specialize in taxation and have unlimited rights to represent taxpayers before the IRS. Enrolled agents’ knowledge in the continually changing field of taxation enables them to effectively represent taxpayers at all administrative levels within the IRS.
Only Enrolled Agents are required to demonstrate to the IRS their competence in all areas of taxation, representation and ethics before they are given unlimited representation rights before the 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.
What are the Additional Advantages of Using an EA?
- An EA can practice in any state. CPAs, on the other hand, may only work in states where they have the proper licensing and jurisdiction.
- Enrolled Agents are required to understand not only the complexity of today’s tax code and how it applies to their clients but also how ongoing changes affect client liability.
- To initially qualify, EAs must pass stringent testing (including a rigorous background check), and are mandated to undergo extensive ongoing training every year. The training scope exceeds the IRS’ requirements.
- EAs must abide by the provisions and ethical standards of the Department of Treasury’s Circular 230.
- When working with an EA, you enjoy limited client privilege under the law and can have confidentiality for certain conditions, like audits and collections.
- EAs may have other specialties outside of taxes. Some also who specialize in areas like offer-in-compromise (OIC).
- Many EAs are former IRS agents since you can get an EA license without taking the exam after working for five years in the IRS. That means in these cases you would be hiring someone with intimate, insider knowledge of the IRS, which can potentially be a huge advantage come tax time.
- Using an Enrolled Agent for taxes is usually more cost-effective than hiring a CPA.
Robert Hall & Associates is founded on the belief that most accounting firms don’t provide the necessary level of tax experience and knowledge. Our firm features Enrolled Agents who specialize in taxation and strive be the foremost tax professionals. As such, Robert Hall & Associates is a premier tax preparer and advisor serving Glendale, Pasadena, Burbank and the Greater Los Angeles area. To learn more about how our team of enrolled agents can provide you with specialized tax knowledge, visit our tax services page.
Receive an Audit Letter from the IRS? Learn how an Enrolled Agent can represent you in an IRS Tax Audit.
Are you planning for the future? Learn what new federal regulations may impact your current and future financial goals.