Differences Between Using a Certified US Income Tax Preparer and an IRS Enrolled Agent
When navigating the complex landscape of US tax regulations, it’s crucial to understand the distinctions between different types of tax preparers. While a superficial understanding of these classifications might lead you to believe there are multiple “certified” tax professionals, only one official certification stands out: that of the Enrolled Agent (EA).
The Role of a Certified Enrolled Agent (EA)
The only true “certified” tax pro is an Enrolled Agent. This certification from the US Department of the Treasury signifies expertise in taxation. Unlike the licensing or competency tests required for some state tax preparers, the EA status is a significant professional milestone above that of a regular tax preparer.
Other Certified Tax Professionals
While the EA is the only tax professional universally recognized at a federal level as an expert in taxation, Certified Public Accountants (CPAs) and tax attorneys also hold important certifications. These professionals are certified and licensed by the state, but they engage in a broader range of activities beyond simple tax preparation.
CPAs and Their Role
CPAs are licensed by state boards and are indeed certified, but their focus extends beyond taxes. While some CPAs specialize in tax preparation, many do not. The idea that a CPA is primarily a tax preparer is not always accurate. For instance, I had several CPAs as clients over the years who did not focus on tax preparation.
Tax Attorneys and Their Practice
Many tax attorneys can prepare tax returns for the general public, but they often focus on clients involved in civil or criminal tax cases. While both CPAs and tax attorneys can represent clients before the IRS and the Tax Court, only the EA is officially certified by the Department of the Treasury as an expert in taxation.
Legal Requirements to Represent Clients to the IRS
To legally represent someone before the IRS, a professional must be an attorney, an enrolled agent, or a CPA. This educational and professional standard is notably higher than what is required of a regular tax preparer, who may or may not have completed a class.
Workplace Dynamics and Responsibilities
At an average tax preparation office like HR Block, one might find a few tax preparers and one or two EAs. Occasionally, a CPA might also be present. However, in a CPA's office, the hierarchy often includes multiple levels of internal ranks, all working under the CPA or an attorney. This means that while the CPA signs the return, the preparer’s knowledge might not be as extensive. However, CPAs are incentivized to be more thorough in their mistake correction due to their comprehensive services.
If your tax situation is straightforward, with just a W-2 and no dependents, then you can likely handle your taxes yourself. Free services are often available, even at strip mall tax preparation joints. As your tax situation becomes more complex, the value of a CPA, EA, or tax attorney increases. CPAs are more qualified for making subjective calls, but the choice between an EA and a CPA depends on your specific needs and the complexity of your tax situation.
Conclusion
The differences between a certified tax preparer, an IRS enrolled agent, and a CPA are significant, especially when it comes to the legal representation of clients before the IRS. While the EA holds the exclusive certification, CPAs and tax attorneys bring specialized skills that can be invaluable, depending on the complexity of your tax situation. Always assess your needs carefully before choosing the right professional to handle your tax preparation.