What Is an Enrolled Agent?

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DEFINITION

An enrolled agent (EA) is a tax professional who has passed an Internal Revenue Service (IRS) test covering all aspects of taxation, and a scrupulous background check. The "EA" designation is the highest tax credential recognized by the IRS.

Definition and Example of an Enrolled Agent

To earn the "EA" designation, a tax professional must pass an IRS test and background check. Those who pass are literally tax experts. Enrolled agents focus exclusively on tax issues, including audits, appeals, and collections. They're said to be "enrolled" because they're specially licensed by the federal government. An enrolled agent is the only type of tax professional who has this type of relationship with the IRS.

  • Acronym: EA

As of the most recent count in September 2021, there were more than 63,000 EAs in the U.S. and Canada.

How Being an Enrolled Agent Works

Like CPAs and tax attorneys, EAs can handle all types of tax matters and can represent their clients' interests before the IRS. The client does not necessarily have to be present. EAs are authorized to appear in place of their clients.

EAs have limited client privilege under the terms of the IRS Restructuring and Reform Act of 1998. The Act provides for confidentiality between the agent and their client under some circumstances involving audits and collections.

Your EA does not have to divulge information to the IRS that you've confided in them unless it concerns the preparation and filing of your tax returns.

Requirements for Becoming an EA

An enrolled agent must take and pass the IRS Special Enrollment Examination (SEE), although a college degree isn't necessary. The exam is eight hours over two days, and it covers all aspects of federal tax law, including taxation of individuals, corporations, and partnerships. It includes various regulations governing IRS collections and audit procedures.

The exam is three parts, and enrolled agents must achieve scaled passing scores of at least 105 in all three sections: one for personal tax issues, one for business taxes, and one regarding procedural issues and representing clients.

Generally, an agent can "save" their passing scores for up to two years and only retake the portion they didn't achieve a passing score on if they pass one or two sections on the first try. In light of the Covid-19 pandemic, this two-year carryover was temporarily extended to three years for test-takers whose scores were due to expire between February and June of 2020.

The test can be taken from June 1 through the end of February of the subsequent year. This allows the IRS time to update the test annually to accommodate current tax law.

A tax professional can also qualify as an EA if they've worked for the IRS for at least five years in a position that requires extensive knowledge of the tax code and its applications.

EAs must also have or obtain a Preparer Tax Identification Number (PTIN) from the IRS, but this is required of anyone who prepares or helps a taxpayer prepare a federal tax return. PTINs must be renewed periodically.

An enrolled agent must additionally pass a "tax compliance check." Their own personal tax records must be in order. They can't owe the IRS and must have filed all their tax returns due to date.

Ongoing Requirements for EAs

EAs must complete 72 hours of continuing education courses every three years. Those who are also members of the National Association of Enrolled Agents (NAEA) must complete 30 hours per year for three years for a total of 90 hours.

Enrolled agents are held to the standards of the Department of Treasury's Circular 230, which lists IRS regulations. NAEA members must additionally comply with the Association's code of ethics and rules of professional conduct or they risk losing their memberships.

The EA designation can be revoked for malpractice by the IRS Office of Professional Responsibility.

Enrolled Agents vs. CPAs

The qualifying requirements for EAs are generally more stringent than those that must be met by certified public accountants (CPAs), but each state sets its own requirements for CPAs. Continuing education requirements for CPAs can also vary by state.

Enrolled Agents Certified Public Accountants
Must pass a comprehensive three-part exam. Must pass a comprehensive multi-part exam, depending on the state.
Must complete 72 hours of continuing education every three years. Must have one year's experience working under a CPA.
Works exclusively with tax issues. Works in accounting, not necessarily with tax issues.

Do I Need an Enrolled Agent?

EA eligibility is stringent and exacting, so EAs advertise their status, and rightly so. You should find the "EA" designation following their names in professional directories or online. You can also call 800-424-4339, call an EA referral service, or visit the NAEA website for a complete list of current agents.

Keep the continuing education and ethical requirements in mind if you select someone from a directory. Someone who was an EA yesterday might not still be an EA today. Do a little homework and check with the EA referral service or the NAEA as well. You can also verify an enrolled agent's status directly with the IRS.

Key Takeaways

  • An enrolled agent is the highest tax professional designation recognized by the IRS.
  • Enrolled agents (EAs) must pass a three-part exam or have worked for the IRS for no less than five years in a position that requires extensive knowledge of the tax code.
  • EAs must be current with their own tax returns, and their taxes due must be paid up and current.
  • EAs focus entirely on tax issues, while CPAs most commonly specialize in accounting.

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