What Is an Enrolled Agent?
An enrolled agent (EA) is a tax professional authorized by the United States government to represent taxpayers in matters regarding the Internal Revenue Service (IRS). EAs must pass an examination or have sufficient experience as an IRS employee and pass a background check. Enrolled agents first appeared in 1884 due to issues arising with Civil War loss claims.
- Enrolled agents are federally authorized to represent taxpayers before the IRS.
- Prospective enrolled agents must either pass the Special Enrollment Examination (SEE) or meet minimum IRS experience requirements.
- Fraudulent claims submitted for Civil War losses prompted the creation of the enrolled agent.
- Enrolled agents also provide tax planning and preparation.
- Although enrolled agents may represent individuals and businesses before the IRS, they are not IRS employees.
Understanding Enrolled Agents
An enrolled agent is a federally licensed tax practitioner who has unlimited rights to represent taxpayers before the IRS for any issues relating to collections, audits, or tax appeals. According to the National Association of Enrolled Agents (NAEA)—the organization that represents licensed EAs—they are allowed to advise, represent, and prepare tax returns for people, corporations, partnerships, estates, trusts, and anything else that is required to report to the IRS.
History of Enrolled Agency
In the 1880s, there were inadequate attorney standards, and Ccertified public accountants (CPAs) were not in existence. The enrolled agent profession began after fraudulent claims were submitted for Civil War losses. Congress took action to regulate EAs to prepare Civil War claims and represent citizens in their interactions with the Treasury Department. In 1884, the Horse Act was signed into law by President Chester Arthur to establish and standardize enrolled agents.
In 1913, when the 16th Amendment was passed, EA duties expanded to include tax preparation and resolving taxpayer disputes with the IRS. In 1972, a group of enrolled agents collaborated to form the NAEA to represent the interests of EAs and increase the professional development of its members.
Requirements of Enrolled Agents
EAs are not required to get college degrees. Some former IRS employees with five years of taxation experience may apply to become an enrolled agent without taking the exam. Non-exempt persons must take and pass the Special Enrollment Examination (SEE). All enrolled agents must complete 72 hours of continuing education every 36 months. CPAs and attorneys may serve as enrolled agents without taking the exam.
Enrolled agents are the only tax professionals who do not require a state license. However, they have a federal license and can represent a taxpayer in any state. They must abide by the specifications of the Treasury Department's Circular 230, which provides the guidelines governing enrolled agents. Enrolled agents that have an NAEA membership are also subject to a code of ethics and rules of professional conduct.
Benefits of Using an Enrolled Agent
NAEA members must complete 30 hours per year of continuing education or 90 hours every three years, which is significantly more than the IRS prerequisite. Enrolled agents offer tax planning, tax preparation, and representation services for businesses and individuals.
Enrolled Agents vs. Other Tax Professionals
Enrolled agents are required to prove their proficiency in every aspect of taxes, ethics, and representation, unlike CPAs and attorneys, who may not specialize in taxes.
EAs are not employees of the IRS. In addition, they cannot display their credentials when representing clients and advertising their services. They cannot use the term certified as part of a title or infer an employee relationship with the IRS.
Outlook for Enrolled Agents
The hiring of tax examiners is projected to decline 4% from 2020 to 2030 as the growth of the tax examiner industry is closely tied to changes in federal, state, and local government budgets. The growth of the enrolled agent industry depends on industry rule changes and the demand for tax services. However, there is a growing need for EAs in private and public accounting firms, law firms, corporations, local and state government agencies, and banks.
How Do I Become an Enrolled Agent?
To become an Enrolled agent, a person must obtain a preparer tax identification number, pass the Special Enrollment Exam, enroll as an agent, and be deemed suitable (e.g., background check) to perform as an Enrolled Agent. Former IRS employees with at least 5 years of experience as field tax professionals.
What Does an Enrolled Agent Do?
An Enrolled Agent is authorized by the U.S. federal government to represent taxpayers before the IRS. They may also serve as tax advisors, planners, and preparers.
How Is an Enrolled Agent Different from a CPA?
While an Enrolled Agent (EA) and a Certified Public Accountant (CPA) are skilled and authorized tax professionals. However, an Enrolled Agent is specifically focused on taxation, whereas a CPA can specialize in taxation and other financial and accounting matters. A person may be an EA and a CPA; however, one appointment does not necessarily qualify the person to serve as the other. CPAs' duties and professional offerings are broader than an EA's.