There are many paths to becoming a tax professional, and some of the most common questions from those new to the tax space revolve around the different titles tax experts can have. If you’re considering a career as a person who does taxes, here are some guidelines to understand the differences and the overlaps among CPAs, enrolled agents, and other tax professionals.
Certified Public Accountant (CPA)
Certified Public Accountants (CPAs) undergo the longest and most challenging certification process and are some of the most qualified tax professionals available. CPAs are tax experts with qualifications to do much more than prepare taxes. They may also provide bookkeeping services, help clients with long-term financial planning, prepare profit and loss statements, and conduct audits, to name just a few of the professional tasks they can accomplish.
Education requirements for a CPA
What are the education requirements for a CPA versus a tax preparer? CPA tax accountant credential requirements vary slightly from state to state. Anyone seeking the designation must take the four-part CPA exam and complete 150 hours of higher education, usually resulting in a bachelor’s (and often a master’s) degree in accounting. Most states also require a would-be CPA to engage in a year or more of professional employment under the supervision of an experienced CPA.
Enrolled Agent (EA)
Another kind of tax professional is an IRS enrolled agent (EA). Enrolled agents must also undergo a certification process to become a paid tax professional. Whereas the CPA credential allows CPA tax preparers to work in non-tax-related fields, the EA credential is specific to tax preparation, so virtually all enrolled agents are professional tax preparers.
Education requirements for an Enrolled Agent
Enrolled agents must pass all three sections of the IRS’s Special Enrollment Examination (SEE) within two years. This three-part test covers 1) Individuals, 2) Businesses, and 3) Representation, Practices, and Procedures.
They must also pass the IRS’s suitability check, which examines their past tax compliance and any criminal history. To maintain their enrolled agent status, EAs must complete 72 hours of continuing education every three years.
Tax preparer
While CPAs and enrolled agents are both tax professionals, the title “tax preparer” is a broad term encompassing any person paid to prepare tax returns.
Education requirements for a tax preparer
One doesn’t need the credentials of a CPA or EA to become a tax professional. In fact, some successful tax professionals have no credentials at all. However, the IRS cautions taxpayers to be selective when choosing a person who does taxes. To increase their credibility and advance their careers, many serious tax professionals eventually choose to become enrolled agents.
The Annual Filing Season Program
Non-credentialed tax professionals can also grow their tax knowledge and credibility by participating in the IRS’ Annual Filing Season Program (AFSP). The IRS created the AFSP to help serious, non-credentialed tax professionals stay informed on tax law and distinguish themselves from other non-credentialed tax preparers.
The AFSP requires 18 hours of continuing education credits, including a six-hour Annual Federal Tax Refresher course and subsequent comprehension exam, ten hours on federal tax law, and two hours on ethics. Participating in the AFSP allows non-credentialed tax professionals to be listed on the IRS’s Directory of Federal Tax Return Preparers.
Comparing a CPA vs tax preparer
What’s the difference between a CPA and a tax preparer? Well, both can prepare taxes, but the latter specializes in tax preparation. On the other hand, CPAs may provide tax preparation services, but they may also offer different professional expertise. And many CPAs don’t perform tax preparation at all. Their education often qualifies them for roles ranging from financial advising and tax planning to audit and bookkeeping services.
Are all CPAs tax preparers?
CPAs, EAs, and tax preparers are all tax professionals. However, since CPAs have several career options, not all CPAs become tax preparers. Many work as government accountants, auditors at public accounting firms, or in-house accountants at small and large businesses.
A CPA has all the necessary credentials, knowledge, and skills to be a tax preparer, but many choose careers outside of tax preparation, like private accounting or auditing. Similarly, many tax preparers are not CPAs. They may be IRS enrolled agents or have no credentials at all.
Which is better: EA or CPA?
It really depends on what kind of tax expert a person or business needs. The CPA credential is more challenging to obtain, but that doesn’t necessarily mean a CPA tax preparer is a better fit than an enrolled agent.
Individuals and businesses with complex tax returns often turn to the expertise of a CPA who specializes in their tax situation. However, CPAs can work in a broader range of fields than enrolled agents. Those who specialize in non-tax areas, such as audit and accounting, may not have as much practical day-to-day experience in tax preparation. Enrolled agents, on the other hand, specialize solely in tax preparation and are well-educated in most tax laws and situations.
What kind of tax professional do you want to be?
If you’re a current or aspiring tax professional trying to decide which credential to pursue, the answer depends on your goals and stage of life. One of the biggest determining factors is whether you’re willing to spend several years taking college courses to become a CPA. If so, the CPA credential will open a wide career path for you, including paths outside of tax preparation.
Many CPAs decide to become CPA tax preparers as a second career to supplement retirement income, engage in seasonal rather than full-time work, or keep certifications current for employment opportunities that might arise down the road.
If 150 hours of college credit isn’t feasible for you and you’re sure you want to become a tax expert, the EA credential may be a better option for you. You’ll gain nearly all the knowledge you need to be a tax professional and stand out to potential clients because of your IRS certification. While you’ll still need to put in considerable work to pass the Special Enrollment Examination, the process isn’t nearly as long or expensive as becoming a CPA.
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