What is an Enrolled Agent?
Enrolled agents (EAs) are America’s Tax Experts. EAs are the only federally licensed tax practitioners who specialize in taxation and also have unlimited rights to represent taxpayers before the IRS.
Enrolled Agents are federally authorized tax practitioners who have demonstrated technical competence in tax law and are the only taxpayer representatives licensed to practice by the United States government. Only EAs, Attorneys and CPAs may represent taxpayers without limitation before the IRS. EAs advise and represent taxpayers before the IRS who are being examined, taxpayers who are unable to pay, and taxpayers who wish to recover penalties. EAs prepare tax returns for individuals, partnerships, corporations, estates, trusts and any other entities with tax-reporting requirements.
Unlike Attorneys and CPAs, who may or may not choose to specialize in taxes, all EAs specialize in taxation and are required by the federal government to maintain their professional skills with continuing professional education.
What does the term “enrolled agent” mean?
“Enrolled” means to be licensed to practice by the federal government, and “agent” means authorized to appear in the place of the taxpayer at the IRS. Only enrolled agents, attorneys, and CPAs have unlimited rights to represent taxpayers before the IRS. The enrolled agent profession dates back to 1884 when, after questionable claims had been presented for Civil War losses, Congress acted to regulate persons who represented citizens in their dealings with the U.S. Treasury Department.
How does one become an enrolled agent?
The license is earned in one of two ways, by passing a comprehensive examination which covers all aspects of the tax code, or having worked at the IRS for five years in a position which regularly interpreted and applied the tax code and its regulations. All candidates are subjected to a rigorous background check conducted by the IRS.
How can an enrolled agent help me?
Enrolled agents advise, represent, and prepare tax returns for individuals, partnerships, corporations, estates, trusts, and any entities with tax-reporting requirements. Enrolled agents’ expertise in the continually changing field of taxation enables them to effectively represent taxpayers at all administrative levels within the IRS.
Privilege and the enrolled agent
The IRS Restructuring and Reform Act of 1998 allow federally authorized practitioners (those bound by the Department of Treasury’s Circular 230 regulations) a limited client privilege. This privilege allows confidentiality between the taxpayer and the enrolled agent under certain conditions. The privilege applies to situations in which the taxpayer is being represented in cases involving audits and collection matters. It is not applicable to the preparation and filing of a tax return. This privilege does not apply to state tax matters, although a number of states have an accountant-client privilege.
Are enrolled agents required to take continuing education?
In addition to the stringent testing and application process, the IRS requires enrolled agents to complete 72 hours of continuing education, reported every three years, to maintain their enrolled agent status. NAEA members are held to a higher standard, they are obligated to complete 30 hours per year (for a total of 90 hours per three year period). Because of the expertise necessary to become an enrolled agent and the requirements to maintain the license, there are only about 46,000 practicing enrolled agents.
What are the differences between enrolled agents and other tax professionals?
Only enrolled agents are required to demonstrate to the IRS their competence in all areas of taxation, representation and ethics before they are given unlimited representation rights before IRS. Unlike attorneys and CPAs, who are state licensed and who may or may not choose to specialize in taxes, all enrolled agents specialize in taxation.
Are enrolled agents bound by any ethical standards?
Enrolled agents are required to abide by the provisions of the Department of Treasury’s Circular 230, which provides the regulations governing the practice of enrolled agents before the IRS.
The history of Enrolled Agents dates back to 1884 when Congress authorized the Enabling Act of 1884, also known as the Horse Act of 1884. Congress recognized a need to regulate individuals representing citizens dealing with the Treasury Department about their claims against the U.S. This act gave the Secretary of the Treasury the authority to regulate who can represent these individuals.
Many people had claims for losses from the Civil War. The Treasury Department was being overwhelmed by some of the most dubious claims you can imagine. Horses were the number one reason for this act. It seemed as most of the horses in America were thoroughbreds. If the horses weren’t thoroughbreds, then they were show horses. To make matters worse, there were more claims for horses than there were horses lost in the Civil War.
These comparisons weren’t just limited to livestock. It seems as if suddenly and miraculously, everything turned from junk to perfection. Timber used for log cabins, became milled black walnut. If it was made pot metal, it became disguised silver. Row boats were turned into yachts. And the claims became more and more ridiculous.
Congress recognized that a person wasn’t making these claims, it was their agents who represented them. These agents would seek out people who might have a claim, right or wrong and for a percentage of what they could collect from the government, they would represent you. Most of these agents were confidence men or scam artists. Congress decided that these agents had to be regulated hence the Enabling Act of 1884. President Chester Arthur responded by signing the Act which was known as the Horse Act of 1884. A standard was created, suitability checks, criminal records, moral character, all of these factors along with testing. The people who passed the requirements were known as Enrolled Agents.
Back in the 1880’s, you didn’t have to go to college or even graduated from high schools to be a Doctor or Lawyer. You simply applied to the school of your choice and if accepted, off you went. No regulations. CPAs were non-existent. Again, because the standards for practice as an Attorney were so lax, they and CPAs, as they became evolved, were required to take and pass the enrolled agent’s exam in order to practice before the IRS until 1936. Since 1965, with the strict State guidelines and regulations for members of the Bar & CPAs, the Treasury department automatically recognizes members of the Bar and legitimate CPA’s. In 1994, the initials E.A. were finally designated by the Treasury Department, as that of Enrolled Agent.
Only Enrolled Agents, CPAs and Attorneys can represent you before the IRS.
Today, Enrolled Agents must pass a difficult two-day examination given annually by the IRS. Less than 1/3 of test-takers pass this test and become Enrolled Agents. They are required to obtain at least 24 hours of continuing education credits annually to maintain their status. They must complete 72 hours during a 3-year cycle.