When filing your taxes, getting professional help can make a huge difference. But with so many different types of tax professionals available, it’s easy to feel overwhelmed by the options. Who can you trust to handle your finances? Who should you call if you get audited by the IRS? Here, we’ll discuss the differences between a CPA, EA, and tax preparer, their qualifications, and when you might want to hire one over the other.
What’s the Difference Between an Enrolled Agent (EA), a Certified Public Accountant (CPA), and a Tax Preparer?
When you need tax advice, finding a professional you can trust to get the job done and stay compliant is essential. However, with different options, finding the right person for the job can be challenging.
Certified public accountants require the longest and most challenging certification process, making them the most qualified tax experts and professionals among the three. CPAs can also work in non-tax-related fields, while enrolled agents can only work in positions specific to tax preparation.
On the other hand, tax preparers don’t need the same number of credentials as a CPA or an EA. They’re simply anyone who is paid to prepare tax returns. Although working with a professional tax preparer without “certifications” is legal, the IRS does recommend that taxpayers be selective when hiring a tax professional.
What’s a Certified Public Accountant (CPA)?
A certified public accountant is a state-licensed professional who can provide individual and business tax services. These include things such as:
Tax Services: Prepare and file tax returns for individuals and businesses, provide tax planning, and help you identify tax credits and deductions.
Auditing: Conduct audits for individuals, businesses, and nonprofit organizations.
Financial Planning: Advise individuals and businesses on budgeting, investments, and retirement planning.
Tax Consulting: Help with business formation, financial management, and compliance issues.
IRS Representation: CPAs can legally represent clients in audits and disputes before the IRS.
CPAs can also prepare and plan taxes for larger organizations and act as tax consultants in more complex situations.
To become a CPA, individuals need to pass an exam within their state and comply with the state-wide educational and experience requirements. While the exam is the same in all states, the requirements may vary. The Uniform CPA exam is four parts, which include:
✔ Auditing and Attestation (AUD)
✔ Business Environment and Concepts (BEC)
✔ Financial Accounting and Reporting (FAR)
✔ Regulation (REG)
Educational requirements typically include a bachelor’s degree in accounting or a related field, along with one to two years of work experience under the supervision of a licensed CPA. CPAs must also be licensed by their state board of accountancy to legally provide tax advice. Maintaining this certification requires continuing education per year, along with upholding a certain set of ethical rules and regulations.
Hiring a CPA may be recommended if you’re experiencing a complex financial situation, such as running a business or investing in real estate. You can also work with a CPA if you’re being audited, looking for long-term tax planning, or need a strong financial strategy for your business.
What’s an Enrolled Agent (EA)?
An enrolled agent (EA) is a federally authorized tax practitioner who can legally represent taxpayers before the IRS. This means they can help with IRS audits, tax appeals, and anything else regarding tax issues. There are very few limitations to what EAs can do or who they can represent in tax-related fields; they can also file tax returns or provide tax planning advice.
Enrolled agents are authorized by the IRS and need to complete 72 hours of continuing education every three years to maintain their status. To become an EA, individuals must pass the IRS Special Enrollment Exam (SEE) or have relevant IRS experience, undergo a background check (which includes a history of past tax compliance), and comply with ethical standards established by the U.S. Department of the Treasury. However, a college degree is typically not required.
Hiring an EA may be a good choice if you’re dealing directly with the IRS or are at risk of an audit. They’re also suitable for those who experience tax issues related to self-employment, small businesses, or those needing help with year-round tax matters.
However, regarding the difference between an EA and a CPA, EAs are only considered tax specialists, while CPAs are accounting professionals also certified in tax-related matters.
What’s a Tax Preparer?
A tax preparer is a general term for anyone who is paid to prepare tax returns for individuals or businesses. This can include certified professionals like CPAs and EAs, and non-credentialed individuals who are simply experienced in preparing taxes. While there is no single path to becoming a tax preparer, all paid preparers must obtain a valid Preparer Tax Identification Number (PTIN) from the IRS.
There are different types of tax preparers, ranging from seasonal workers at national tax chains to volunteers in programs like the IRS’s Volunteer Income Tax Assistance (VITA). Some may have extensive experience, while others complete short training programs to assist during tax season.
Tax preparers help individuals and families file their tax returns accurately and on time. They are best suited for straightforward tax situations that don’t require in-depth financial planning or IRS representation.
How to Choose the Right Tax Professional
A basic tax preparer or even tax software may suffice for simple tax returns, such as those involving only W-2 income. However, if you’re self-employed, own a business or rental property, or have a more complex financial situation, you’ll likely benefit from working with an EA or CPA. Both enrolled agents and certified public accountants can help with tax preparation for individual and business tax returns. However, CPAs can also help with other financial aspects of your life or business.
Before hiring anyone, ensure they have a valid Preparer Tax Identification Number (PTIN), and verify their credentials through the IRS, your state’s Board of Accountancy, or a professional directory. If they don’t have a PTIN, finding someone else is essential. Other questions include things like:
What are your credentials?
✔ What kind of clients do you usually work with?
✔ How do you keep up with changing tax laws?
✔ Will you represent me if I get audited by the IRS?
✔ How do you handle communications and questions outside of tax season?
✔ Can you provide references or reviews from other clients?
Choosing the right tax professional can significantly affect your financial well-being, whether filing a simple return, managing a business, or navigating an IRS audit. If you’re looking for reliable, experienced tax support, Del Real Tax is here to help.
With over a decade of tax and accounting experence, our team can provide you with a wide range of expertise, from straightforward filings to complex tax strategies and year-round financial guidance. Contact us today to learn more about how we can help.
