EA OR CPA? THAT IS THE QUESTION

Joe Arsenault, a CPA, has a great post in “CPA or EA? It’s Just a Designation” at his blog CAFÉ TAX. 

Joe’s post is a response to “an interesting conversation (that) has been taking place for a while in one of the CPA forums I follow. The conversation compares the Certified Public Accountant (CPA) and Enrolled Agent (EA) designation. The question that started it all was ‘what is the better designation to get?’.”

The post does a good job of describing the scope and requirements of each of these designations.

Everyone knows what a CPA is (Constant Pain in the Arse – just joking), but not everyone is familiar with the initials EA. As Joe points out above they stand for “Enrolled Agent”.  Many of those who have heard of the initials EA are confused about what they mean.

An Enrolled Agent is not an agent or employee of the Internal Revenue Service.  He/she is “enrolled” to act as a taxpayer’s “agent” when dealing with the IRS. Prior to the creation of the RTRP designation, EA was the only set of initials that indicated that its holder was knowledgeable, experienced, and current in federal individual income taxes.

For years it has been suggested that a better designation be found for the EA to avoid the confusion.  I do believe that in the course of the IRS institution of its preparer regulation regime EAs were given the chance to pick a new name for their designation, but they chose to keep it as Enrolled Agent.

I have been an accountant and tax preparer for about 40 years, yet I am neither a CPA nor an EA (although at one point early in my career I did work for one of the then “big eight” CPA firms).  Over the years I have investigated the various proposed non-EA tax preparer designations (i.e. several attempts at a CTP – Certified Tax Preparer) but none of these carried the same weight or credibility as EA, or actually lasted very long. 

The basic thing a CPA can do that a “just plain” accountant cannot is certify an audit.  And the thing an EA can do that I cannot is represent taxpayers before the IRS (without a Power of Attorney).  I have never had any desire to audit financial statements or to represent taxpayers, other than in audits of clients whose 1040s I have prepared, before the IRS.

In the course of his discussion Joe makes an excellent point -

“I want potential candidates to realize that their work and character will determine their level of success, not their designation.”

While I have said for years that having the initials CPA after one’s name does not mean the person knows his/her arse from a hole in the ground about taxes, I have also said – “While it may actually be possible that the best tax preparer, at the best price, for your particular situation is either a CPA or an H+R Block, or other fast-food chain, employee, this is only because of the education, experience, ability, temperament, and other factors that are specific to that individual preparer.”

I wholeheartedly agree with Joe’s final assessment (the highlights are mine) -

“EAs focus on completely on taxes and CPAs may or may not focus on taxes. If you are someone who only wants to do tax work an EA may be the smart choice. CPAs are more involved in financial accounting, industry and other areas such as financial planning. I know many people who are CPAs but they can’t prepare their own tax return. Not all CPAs are tax professionals. There is nothing wrong with that.”

I would add that if a person wants to concentrate on taxes but also do accounting work, but not certify audits, for clients he/she does not need to become a CPA.  You can be a designated Public Accountant (PA), which may require registration and/or licensure in some states, or, like me, a “just plain” accountant.

As an aside, I like that Joe supports my position on exempting CPAs from the IRS competency test for tax preparers (again the highlight is mine) -

“I will also raise the point about designations and PTIN requirements and would suggest only exempting EAs from the testing requirements.”

FYI Joe used to publish a BUZZ-like weekly CAFÉ BEANS post, highlighting posts he felt would be of interest to his readers from other tax and personal finance bloggers.  He no longer publishes a separate BEANS post, but does reference such items at the end of each of his posts.  Thanks to Joe for frequently including TWTP posts, and for plugging my TWTP posts in his “tweets”.

TTFN