Wednesday, January 14, 2015


Looking for a tax professional?

There are many initials that are related to tax preparation.  See my article “Alphabet Soup” at FIND A TAX PROFESSIONAL.

When it comes to 1040 preparation one of the most important set of initials is EA – for Enrolled Agent.

Many taxpayers either have no idea what an Enrolled Agent is or erroneously think that an EA is an employee of the IRS.  An Enrolled Agent is NOT an agent or employee of the Internal Revenue Service.  While the EA credential is administered by the IRS, an Enrolled Agent is an independent tax professional who is “enrolled” to act as a taxpayer’s “agent” in proceedings with the IRS.

So just what is an Enrolled Agent?

The Internal Revenue Service tells us –

An Enrolled Agent is a person who has earned the privilege of representing taxpayers before the Internal Revenue Service by either passing a three-part comprehensive IRS test covering individual and business tax returns, or through experience as a former IRS employee. Enrolled agent status is the highest credential the IRS awards. Individuals who obtain this elite status must adhere to ethical standards and complete 72 hours of continuing education courses every three years.”

The three parts of the Enrolled Agent exam – known as the Special Enrollment Examination – are

Part 1 - Individual
Part 2 - Business
Part 3 - Representation, Practice and Procedures

Required CPE includes two hours per year of “ethics”.

Enrolled Agents have unlimited practice rights. This means they are unrestricted as to which taxpayers they can represent, what types of tax matters they can handle, and which IRS offices they can represent clients before.

Some history -

The official designation of “Enrolled Agent” first appeared as a reaction to fraudulent war loss claims arising after the Civil War.  The “Enabling Act of 1884”, also known as the “Horse Act of 1884”, gave an Enrolled Agent the power to act as an advocate for citizens and prepare claims against the government.  When the federal income tax was created in 1913 the Enrolled Agent designation was expanded to include advocacy in claims involving federal income tax.

In 1921 a number of circulars dating back as far as 1886 were combined with other statutes into a singular Treasury Department Circular known as “Circular #230” to address “the laws and regulations governing the recognition of agents, attorneys and other persons representing claimants before the Treasury Department and offices thereof.”

The first Special Enrollment Exam was given in 1959, and “Treasury Cards” were issued to those who passed. Tax practitioners who possessed a Treasury Card were given the same rights and privileges to represent clients before the Treasury Department and the Internal Revenue Service as attorneys and Certified Public Accountants.  In 1966 Treasury Card holders were officially designated as an “Enrolled Agent”, and effective 1994 the initials “EA” were designated to identify the Enrolled Agent credential.

When I first started out in “the business” I had no idea that an Enrolled Agent credential existed.  I first became aware of the designation when EA began to appear after the name of tax preparers in the mid-90s.  I never became an EA because by that time I had no desire to represent non-client taxpayers before the IRS.  However, looking back, if I had been aware of the credential when starting out back in the 1970s I might have become one.   

The AICPA wants you to erroneously believe that CPAs are automatically 1040 experts, and that they “own” tax preparation.  But this is not true.  An individual CPA may be a 1040 expert, based on his/her specific education, training, and experience, but the initials CPA after one’s name is by no means any indication of competence or currency in the preparation of individual income tax returns. 

But individuals who possess the EA credential have indeed demonstrated competence and currency in 1040 preparation via testing and mandatory CPE in taxation.


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