When doing accounting and tax returns, you may wonder about the difference between an enrolled agent and a certified public accountant. While both are licensed professionals and can handle accounting and tax-related issues for individuals and businesses, choosing between them will depend on your needs.
So, suppose you are wondering which one is better for you. In that case, this article will reveal the definition of enrolled agent and certified public accountant, the main differences between EA vs CPA, and when to work with them so you can make the right decision.
Enrolled Agent vs CPA, the ideal tax preparer will depend on the types of services you need
See more: How Much Does It Cost To Get Your Taxes Done? 2023 Tax Preparation
What is an EA (Enrolled Agent)?
An enrolled agent (EA), a tax advisor, or a tax preparer is a professional authorized by the Internal Revenue Service (IRS). They specialize in tax matters and have the right to represent taxpayers before the IRS. An enrolled agent with the certifications and intensive expertise can handle even the most complicated issues.
Enrolled agents have numerous responsibilities to fulfill clients’ requirements, including:
- Prepare, calculate, and file tax returns for individuals and businesses and ensure the accuracy of various tax forms.
- Represent the taxpayer before the IRS relating to issues with their taxes, including audits, collections discrepancies or appeals, etc.
- Provide tax advice to clients while complying with IRS rules and regulations.
- Keep client confidential tax information and personal documents.
- Complete education courses each year to maintain licensure.
- Stay up to date with tax laws and regulations every year
- Answer their questions regarding their taxes.
- Analyze past and present financial data, then create a tax plan for clients for future use to help them have better financial health.
- Calculate tax credits, deductions, liabilities, and other exceptions like IRA (individual retirement arrangement) to reduce taxes.
An enrolled agent with the certifications and intensive expertise can handle even the most complicated issues
Enrolled agents are the most cost-effective option among tax preparers. They usually handle startups, small and mid-sized individuals, and business taxpayers to handle bookkeeping and tax preparation conveniently and easily.
Although enrolled agents can handle the same tasks as CPAs, they may not be the best choice for extensive audits or criminal matters. Therefore, consider your actual needs and ask your potential enrolled agents about their abilities before using their services.
What is a CPA (Certified Public Accountant)?
A Certified Public Accountant is an accountant licensed by the state. They provide accounting services to taxpayers.
CPAs have more flexible and expansive services than EAs. They can handle accounting, tax, and financial services as well.
Certified Public Accountants have numerous responsibilities to fulfill clients’ requirements, including:
- Analyze client’s financial records to prepare, calculate, and file tax returns to reduce liabilities.
- Prepare and create financial documents such as tax returns, budget reports, and financial statements and conduct audits for clients if needed.
- Make sure clients pay full taxes and on-time.
- Ensure the client’s financial records comply with federal, state, and local laws and regulations.
- Create earnings reports for businesses.
- Keep track of costs and profits by creating accounting records.
- Guide businesses and individuals regarding financial management.
- Provide tax management services.
- Help clients set and achieve financial goals by assisting clients with financial planning and future business projection.
Unlike EAs, CPAs can do almost work of all sizes, from startups and small-mid sized to large businesses
CPAs can represent clients as taxpayers in US Tax Court. However, they need more training in this field. That’s why they are not the perfect choice if you seek help from someone who can handle tax crimes.
What’s the Difference Between EA vs CPA?
Role and Licenses Requirement Differences
CPAs are accounting professionals licensed by states. They can work for the government, individuals, businesses (small or large companies), or be self-employed. They can be:
- Auditors
- Accountants
- Business advisors
- Corporate accountants and executives
- Tax consultants
- Tax specialists
- Forensic accountants
- Financial planners
- CFO
- Controller
EAs are tax specialists who are authorized by IRS or federal government. Enrolled agents typically work for tax filing franchises, tax companies, and accounting firms. They also can be self-employed or work for a CPA or representative for taxpayers before the IRS on tax matters.
All tax preparers, including Enrolled Agents and Certified Public Accountants, need to obtain PTIN from the IRS
EAs can do the job in all 50 states because they have the highest credential awarded by the federal or the IRS. In contrast, CPAs can only do the job in the state they are certified in. However, CPAs are still a good choice for those who want to take advantage of extensive services because they can provide a much more expansive scope of tax services than EAs.
Time Requirement Difference
CPAs
It takes 6 to 9 years to become a CPA. There are different requirements regarding education and experience for CPAs among states in the United States. However, most states require at least a bachelor’s degree, which might take four years to complete before attending the CPA exam. Some states even require candidates to work in accounting for at least two years.
Every state also has its own rules for maintaining the license. Most states require CPAs to have CE (continuing education) at least 40 hours yearly. They must also comply with the regulations of each state’s board of accountancy, CPA society, and other agencies.
EAs
It takes less time to become an EA. They must pass a three-part test administrated by the IRS, then apply for EA certification or licensure.
To maintain licensure, they must complete at least 72 hours of CE (continuing education) every three years. They also must comply with ethical standards established by the Department of Treasury.
CPA and an EA can lead to a difference in the provision of extended tax-related services and hourly rates.
See more: How To Become a CPA? – The Comprehensive Guide
Hourly Rate Difference
The average hourly rate for a CPA is between $30-$500 versus $28-$36 for a tax preparer EA, depending on qualifications, experience, and rank.
An example of the Average Cost of Tax Preparation
Services Difference
CPAs and EAs can provide superior services as they are knowledgeable, well-qualified, and have the required licensure to perform the job. Therefore, if you are wondering what is best for you, the answer would be what types of services you need.
When To Work With An EA?
If you need help in tax matters such as a collection problem or an audit, hiring an EA is the right choice since they are professionals in this field. Not only specialize in tax preparation and tax resolution, but they are also competent in dealing with the IRS.
Besides, hiring an enrolled agent can be considered an affordable option among tax preparers. They can perform the same services as a tax attorney and CPA for a much lower price. They also can be responsible for bookkeeping services for businesses for upcoming tax returns.
Furthermore, the EA designation is a federal credential, meaning that EAs have unlimited rights to perform practice across the US. Therefore, clients can work with enrolled agents from all over the US.
However, EAs are usually suitable for small and mid-sized businesses. EAs are also ideal for dealing with an extensive audit, revenue officer, high-value collection actions, or tax crimes.
When To Work With A CPA?
If you need help in tax and accounting matters, then hiring a CPA agent is the right choice. They specialize in accounting, audit, and tax filing services.
Hiring a CPA agent is a good choice as they provide clients with many services, such as tax and financial planning and accounting.
CPAs have the authority to represent clients in tax matters before the IRS. However, they are not trained in this field. That’s why they might not be the best idea if you are about to deal with extensive audit or tax crimes.
Frequently Asked Questions
Should I Hire A CPA Or An Enrolled Agent?
As mentioned above, hiring a CPA agent or Enrolled Agent will depend on the services you need. They are both professional and experienced, but the difference is the service they provide.
How Do I Become A CPA?
Every state has its rules, but most require at least a bachelor’s degree and some even require candidates to have at least two years of experience working in accounting. To maintain the licensure, they must do at least 40 hours of CE (continuing education) every year. This process might take up to 9 years to complete.
See more: How Much Does A CPA Cost? Tax Preparation For Business Owners
How long does it take to be an EA?
Becoming an EA might take 3-8 months, depending on your skills and tax knowledge. For beginners, it might take up to 1 to 2 years to study to pass the EA exam. The EA exam has three parts. The best scenario is that you should study and pass each test within 3 to 4 months.
In conclusion, when you know the differences between an EA vs CPA, you will get an answer to What is best for you – CPA or EA assistance. Choosing a trusted or Enrolled CPA agent can help you save great tax returns. If you plan to hire a tax preparer with skills and experience, visit Secur Accounting Outsourced Tax Preparation Services for more information.
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