There are many paths to becoming a tax professional, and some of the most common questions from those new to the industry center around the different titles tax pros can have. In this post, clearing up the confusion and covering the differences and the overlaps between the CPAs, EAs, and tax professionals.
Certified Public Accountant (CPA)
With a long and difficult certification process, Certified Public Accountants (CPAs) are some of the most qualified tax professionals available. While requirements for the CPA credential vary slightly from state to state, all states require the difficult four-part CPA exam and 150 hours of higher education, usually resulting in a bachelor’s (and often a master’s) degree in accounting. Most states also require a period of a year or more of professional experience under other CPAs.
Because CPAs have several career options, not all CPAs become tax preparers. Many end up working as government accountants, auditors at public accounting firms, or in-house accountants at both small and large businesses.
Enrolled Agent (EA)
IRS Enrolled Agents have undergone a difficult certification process to earn that title. Enrolled Agents must pass all three sections of the IRS’s Special Enrollment Examination (SEE) within a two year period. This three-part test covers 1) Individuals, 2) Businesses, and 3) Representation, Practices, and Procedures.
They also need to pass the IRS’s suitability check, which looks into their past tax compliance as well as any criminal history. To maintain their Enrolled Agent status, EAs must complete 72 hours of continuing education every three years.
Whereas the CPA credential allows CPAs to work in non-tax related fields, the Enrolled Agent credential is specific to tax preparation, so virtually all EAs are professional tax preparers.
Tax professional is a broad term and encompasses anyone who is paid to prepare tax returns. While CPAs and Enrolled Agents fall into this category, these credentials aren’t necessary to become a tax professional. In fact, some successful tax professionals have no credentials at all.
However, the IRS cautions taxpayers to be selective with their choice of tax preparer and choose one with trustworthy credentials. To increase their credibility and advance their career, many serious tax professionals eventually choose to become an EA.
The AFSP: An option for non-credentialed tax professionals
Another option to boost tax knowledge and credibility is to participate in the IRS’s Annual Filing Season Program (AFSP). The IRS created the AFSP to help serious, non-credentialed tax professionals stay well-informed and stand out from other non-credentialed tax preparers. The AFSP requires 18 hours of continuing education credits, including a 6 hour Annual Federal Tax Refresher Course and subsequent comprehension exam, 10 hours on federal tax law, and 2 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.
Is a tax professional the same as a CPA?
Not necessarily, but they can be. A CPA has all the necessary credentials, knowledge, and skills to be a tax professional, but many choose careers outside of tax preparation such as private accounting or auditing. Similarly, many tax professionals are not CPAs; they may be IRS Enrolled Agents or have no credentials at all.
Which is better: EA or CPA?
The short answer: it depends on exactly what you’re looking for. The CPA credential is more difficult to gain, but that doesn’t necessarily mean a CPA is a better fit for a certain tax situation than an EA. It’s true that individuals and businesses with the most complex tax returns often turn to the expertise of a CPA who specializes in their tax situation. However, CPAs can work in a wider range of fields than EAs, and those that specialize in non-tax areas such as audit and accounting may not have practical day-to-day experience in tax preparation. EAs, on the other hand, specialize solely in tax preparation and are well-educated in most tax laws and situations.
If you’re a current or aspiring tax professional trying to determine 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.
If 150 hours of college credit isn’t feasible for you and if you’re sure that you want to specialize in taxes, the EA credential is a better option for you. You’ll gain nearly all of the tax knowledge you’ll need to be an excellent tax professional, and you’ll stand out to potential clients. While you’ll still need to put in considerable work to pass the Special Enrollment Examination, the process isn’t nearly as long or as expensive as the process of becoming a CPA.
Ready to start your career as a tax professional? Our Ultimate Guide to Starting a Tax Preparation Business can get you started.