Individuals and businesses are required to file their tax returns every year. Doing ityourself, in most cases, is too complicated and time-consuming. This is where financialadvisors and tax preparers come in to help. However, not every tax preparer has thesame knowledge, qualification, and certification.
Enrolled agents are the only tax preparers who are tested and certified by the federalgovernment of the United States. Unfortunately, many individuals and businesses arenot even aware of their existence, partially because there are not that many enrolledagents around the country, and the number varies around 50,000 individuals.
The enrolled agent profession appeared back to 1884 when questionable claims havebeen presented for Civil War losses, and Congress acted to regulate individuals whorepresent citizens in their dealings with the United States Treasury Department. Thismeans that they existed before CPAs. Enrolled agents are the only federally licensedtax practitioners specialized in taxation and have unlimited rights to represent taxpayersbefore the Internal Revenue Service (IRS).
Enrolled agents share the same knowledge base as the certified public accountants(CPAs) when it comes to preparing your tax returns. They also share equal unlimitedrights to represent taxpayers as CPAs and attorneys. The enrolled agents are federally
licensed, while attorneys and CPAs are licensed by each state, thereby enabling themto serve a broader base of taxpayers.
What is an enrolled agent required in a business? We will talk about this in more detaillater but want to note that their expertise in the ever-changing field of taxation enablesthem to properly file all taxes, save on fees while adhering to all the tax codes andeffectively represent taxpayers, including business owners, at all administrative levelswithin the IRS.
What Does an Enrolled Agent Do?
The unlimited practice rights that enrolled agents have meant that they can represent alltaxpayers, including businesses and organizations as well as individuals. Enrolledagents are fully-fledged, very highly qualified tax professionals who advise, serve, andprepare tax returns for individuals, corporations and partnerships and any otherindividuals or business firms who are obligated to report their taxes.
If you are a taxpayer who is not able to pay taxes, trying to avoid or recover penalties orneed assistance with taxation from federally-authorized tax practitioners, then enrolledagents are the right choice for you. Their only focus is taxation, tax practices, andprocedures as well as representation and defending of taxpayers before the InternalRevenue Service.
However, not everyone knows that enrolled agents cannot practice before the UnitedStates Tax Court. To be allowed to practice before the US Tax Court, they will need topass the Tax Court examination. The United States district courts, bankruptcy courts,courts of appeal, and the Supreme Court of the United States will accept only attorneys.
How enrolled agents get credentials?
Enrolled agents need to earn a privilege to represent taxpayers. To do so, they eitherneed to pass the Special Enrollment Exam (SEE/EA exam) or have a minimum of 5years IRS experience along with meeting other requirements. Moreover, to preservetheir status as the enrolled agent, it is essential to complete 72 hours of continuingeducation every three years.
Enrolled Agent Exam
To become an enrolled agent, one needs to meet the education requirements and passall three sections of the Special Enrollment Exam, which covers all aspects of federaltaxation. In part one, the future agents are tested on taxation of individuals. Within thetwo years of taking the first test, the other two parts need to be completed. Part twocovers businesses and part three – representation, practices, and procedures.
Each part of the exam takes three and a half hours to complete and has 250 questions.After passing the test, they need to apply for enrollment and pass the compliance testas well as a background check. It should be noted that only less than 1/3 of test-takerspass SEE. Only after all these steps are complete, the individuals can be awarded acertification and unlimited rights to represent their clients.
Passing this exam is not very simple, and besides having an appropriate education,many futures enrolled agents take advantage of additional courses that focusspecifically on taxation and the laws, regulations, etc. that are associated with it. Thepreparation for the Special Enrollment Exam involves studying for twenty or more hoursa week for several weeks, depending on the experience of the test taker. This givesthem not only a chance to successfully pass the exam and get enrolled but alsoprofessionally represent their clients in the future.
Work Experience at IRS
If one has already worked at the IRS, then this is another way to get an enrolled agentcertification. For this, an individual must meet the following requirements:
- Must have a minimum of 5 years of experience working at IRS in a position thatrequires interpretation as well as the application of the tax code and regulations
- Must apply for enrollment with Form 23
- Must undergo a background check. This is needed to verify that the individualhas the necessary experience as well as to check how diligent they filed and paidtheir taxes. Taxes that were not registered or paid on time might lead to a denialof certification.
Passing the exam or working at the IRS and meeting all the requirements for becomingan enrolled agent is not the end of the road. The enrolled agent must continually stayupdated on all the changes in taxation. What is an enrolled agent required to do toensure this? They are required to renew their license every three years as well ascomplete 72 hours of continuing education in taxation.
If the enrolled agent is a member of the National Association of Enrolled Agents(NAEA), then he or she will need to complete 90 hours of continuing educations insteadof 72 hours of continuing education, with 30 hours of training every year including 2hours of education in ethics. National Association of Enrolled Agents members needs toadhere to the requirements of an honest, knowledgeable, and ethical representation ofthe taxpayers before the governmental agencies.
Although continued education can be completed at any time during the three years forwhich they are given the enrollment, enrolled agents must have a minimum of 16 hoursof continued education, 2 hours of which is an education in ethics, completed everyyear. They are bound by a code of ethics, which can be found in the Department of theTreasury’s Circular 230. After a notification from the IRS about the upcoming renewalcycle, enrolled agents will need to complete the necessary paperwork and submit it tothe IRS online or through the mail to keep their enrollment.
What is an enrolled agent needed for in business?
Filing and paying business taxes can be complicated, and an increase in IRSenforcement has made the services of the enrolled agent even more necessary in thepast years. Enrolled agents specialize in all aspects of taxation. They are the only taxprofessionals who are tested and licensed by the U.S. government. They can help youwith your business tax returns, general tax compliance requirements, as well as otheraccounting tasks you might have.
There may be situations where an enrolled agent can advocate on your behalf,represent you or communicate with the IRS for you. These include receiving a letter orbill in the mail from the IRS if you cannot pay your tax in full by the April 15 th or if youhaven’t received your refund, if eligible. Since enrolled agents are federally licensed andhave unlimited rights to represent taxpayers before the IRS, they are a perfect choicefor handling your tax matters and representing you for audits, collections, and appeals.
So, what have enrolled agent benefits for businesses? Let’s quickly review the mainadvantages of hiring the EA instead of another qualified professional, such as CPA orattorney:
⮚ More expertise in tax matters – enrolled agents are the nation's only solelydedicated tax professionals who are also required to demonstrate competency infederal tax law continually. This means that you will have much less chance to beaudited by the IRS or run into any other liabilities.
⮚ A federal, nation-wide license – you can search for an enrolled agent anywherein the country. You can also save time and effort if you have businessesoperating in different states because you do not have to search for a tax preparerin every state. This can also help companies to save on tax costs if the localCPAs and other tax preparers charge higher than those in other states whilegetting the same services.⮚ Unlimited practice rights – enrolled agents can provide services such asindividual and business returns, including corporations, partnerships, and limitedliability companies, payroll tax issues, sales tax, and rental income returns aswell as more complicated tax returns, business consultation, and advising, auditrepresentation, bookkeeping and much more.⮚ Round the year work – tax services are around year work for the enrolled agentsbecause they not only help with tax returns during the tax season but also helpwith tax planning, represent their clients before the Internal Revenue Services,etc.⮚ Representation before the IRS – no business is safeguarded against audits,examinations, payments, collections, and appeals. Thus, it is crucial that your taxpreparer can also stand before the Internal Revenue Services on your behalf tonegotiate a settlement, conduct hearings, and manage appeals and help yourbusiness run without any hick-ups and issues.
If you are looking for experienced, well-trained tax professionals who will prepare yourtax return and be there to represent you before the IRS, then EA is your top choice.When hiring the enrolled agent, instead of CPAs or attorney who might not evenspecialize in taxation, you can be confident that this person will handle any taxsituations in the most professional way while adhering to the highest ethical standards.
You can find an enrolled agent to provide services for your business by searching theNational Association of Enrolled Agents (NAEA) in the “Find a Tax Expert” directory.You also might want to look for a specialist on local yellow pages, looking for a taxpreparer who has specified that he or she is an enrolled agent/tax professional or hasEA at the end of his/her title. Tax preparation companies that are widely used can alsohave enrolled agents on their team.