EA vs. CPA

To become an Enrolled Agent, one must pass the IRS Special Enrollment Exam. This exam covers all aspects of the federal tax code, including accounting methods, IRS procedures, taxpayer representation and the regulations that govern our practice.

All EA candidates must pass a background check. Enrolled Agents not only prepare tax returns for individuals, businesses and other entities, but also perform tax analysis, consulting, tax planning, and represent taxpayers before the IRS and state tax authorities (not to be confused with representation in tax court which can only be done by tax attorneys). Enrolled Agents must have a peripheral knowledge of account record keeping and be able to read financial reports. EAs are hired by accounting firms (including your small local CPA firm), wealth management firms and as in-house tax specialist in any number of industries.

NOTE: The only other way to become an EA is by having previously worked at the IRS for at least five years in a position requiring interpretation and application of the tax code on an ongoing basis.

A CPA’s education and training encompasses a much broader field. To get the CPA title, one must have a degree in accounting and work for two years under another CPA and then take the Uniform CPA Exam. That exam covers the big-umbrella categories of auditing & attestation, business environment & concepts, financial accounting & reporting, and regulations. CPA’s can choose to apply their foundational knowledge to a number of professions – auditor, business consultant, financial analyst, [forensic] accountant, etc.. CPA’s can, if they chose, help businesses determine the financial viability of a business plan or structure, budgeting, and improving profitability. Bookkeeping, payroll and tax preparation may go part and parcel with a CPA’s overall service to businesses. But tax preparation and consulting is such a big and complex enough area in and of itself, that many CPA’s focus on primarily just that.

Both EA’s and CPA’s must complete a minimum number of continuing professional education (CPE) credits each year, per their certification. (For members of the Nat’l Ass. of EA’s, like myself, the CPE requisite is higher than that of the IRS.) CPA’s offering tax services often attend courses and seminars sponsored by associations of Enrolled Agents.

Apart from continuing education, expanding one’s knowledge and staying abreast of the ever-changing laws requires copious amounts of reading, be it of Treasury regulations, IRS revenue rulings. memos or news updates, and professional articles.  And don’t forget state tax law too!

Keeping well connected with one’s professional peer group is also critically important. No one can do this job in a vacuum; we lean on each other frequently.

At the end of the day, what makes a good tax professional is not so much his/her/their title – EA, CPA or even JD. It’s found at the personal level – a commitment to understanding and critical thinking, to due diligence and transparency, to recognizing and correcting errors, to organization and having clear processes, to resigning hubris. In a nut shell, it’s having the clients’ best interest at heart.