What Is an Enrolled Agent?

What Is an Enrolled Agent?

If you're dealing with tax issues, you might need to know about enrolled agents. An enrolled agent, or EA, is a tax professional authorized by the United States government to represent taxpayers in matters involving the Internal Revenue Service, or IRS. To become one, you have to pass an examination or have enough experience as an IRS employee, plus pass a background check. The role first emerged in 1884 because of problems with Civil War loss claims.

Key Takeaways

Enrolled agents hold federal authorization to represent taxpayers before the IRS. If you're aiming to become one, you must either pass the Special Enrollment Examination (SEE) or meet minimum IRS experience requirements. The creation of enrolled agents stemmed from fraudulent claims for Civil War losses. They also handle tax planning and preparation. Remember, while they represent individuals and businesses before the IRS, enrolled agents are not IRS employees.

Understanding Enrolled Agents

As a federally licensed tax practitioner, an enrolled agent has unlimited rights to represent you before the IRS on issues like collections, audits, or tax appeals. According to the National Association of Enrolled Agents (NAEA), which represents licensed EAs, they can advise, represent, and prepare tax returns for individuals, corporations, partnerships, estates, trusts, and anything else that reports to the IRS. If you're facing tax problems, this is the kind of professional who can step in directly.

History of Enrolled Agents

Back in the 1880s, attorney standards were inadequate, and certified public accountants didn't exist yet. The enrolled agent profession started after fraudulent claims were submitted for Civil War losses. Congress acted to regulate EAs so they could prepare those claims and represent citizens with the Treasury Department. In 1884, President Chester Arthur signed the Horse Act into law to establish and standardize enrolled agents.

When the 16th Amendment passed in 1913, EA duties grew to include tax preparation and resolving disputes with the IRS. By 1972, a group of enrolled agents formed the NAEA to represent their interests and boost professional development.

Requirements of Enrolled Agents

You don't need a college degree to become an EA. Some former IRS employees with five years of taxation experience can apply without the exam. Otherwise, you must take and pass the Special Enrollment Examination (SEE). All EAs need 72 hours of continuing education every 36 months. CPAs and attorneys can serve as EAs without the exam.

Enrolled agents are unique because they don't require a state license; their federal license lets them represent taxpayers in any state. They follow the Treasury Department's Circular 230 guidelines. If they're NAEA members, they also adhere to a code of ethics and professional conduct rules.

Benefits of Using an Enrolled Agent

NAEA members complete 30 hours of continuing education per year or 90 hours every three years, which exceeds the IRS minimum. Enrolled agents provide tax planning, preparation, and representation for businesses and individuals. If you need reliable tax help, their specialized knowledge can be a strong asset.

Enrolled Agents vs. Other Tax Professionals

Enrolled agents prove their proficiency in all aspects of taxes, ethics, and representation, which isn't always the case for CPAs and attorneys who might not specialize in taxes. EAs aren't IRS employees, and they can't display credentials in ways that suggest otherwise or use terms like 'certified' in titles implying an IRS connection.

Outlook for Enrolled Agents

Tax examiner hiring is projected to decline 4% from 2020 to 2030, tied to government budget changes. The enrolled agent field's growth depends on rule changes and demand for tax services. Still, there's increasing need for EAs in accounting firms, law firms, corporations, government agencies, and banks.

How Do I Become an Enrolled Agent?

To become an enrolled agent, obtain a preparer tax identification number, pass the Special Enrollment Exam, enroll as an agent, and pass a background check to be deemed suitable. Former IRS employees with at least five years as field tax professionals can qualify without the exam.

What Does an Enrolled Agent Do?

An enrolled agent is authorized by the U.S. government to represent taxpayers before the IRS. They can also act as tax advisors, planners, and preparers.

How Is an Enrolled Agent Different from a CPA?

Both enrolled agents and certified public accountants are skilled tax professionals, but EAs focus specifically on taxation, while CPAs can specialize in taxation plus other financial and accounting areas. You could be both an EA and a CPA, but one doesn't automatically qualify you for the other. CPAs have broader duties than EAs.