What is an Enrolled Agent in finance? This accounting professional may be a taxpayer’s greatest asset when tax time rolls around. As federally licensed tax professionals, enrolled agents focus exclusively on financial matters related to taxation and are ready, willing and legally able to represent their clients in front of the Internal Revenue Service if a dispute arises.
What Services Can an Enrolled Agent Provide?
Anyone can prepare a federal tax return, but only a select few are legally allowed to represent a taxpayer in front of the IRS. Enrolled agents are among that group, according to the National Association of Enrolled Agents. Accounting professionals who specialize in taxation, enrolled agents answer questions regarding local, state and federal tax codes, offer tax advice for trusts, estates, partnerships, corporations and other legal entities, prepare tax returns, and represent taxpayers who are caught in a clash with the IRS.
How Does Someone Become an Enrolled Agent?
According to the IRS, there are two paths people can use to become enrolled agents. In the first scenario, accountants not affiliated with the IRS must acquire a Preparer Tax Identification Number and then apply to sit for the Special Enrollment Exam, a three-part multiple choice test. After successfully passing the exam, applicants must enroll and pay the appropriate fee. They must also pass a tax compliance review that verifies their personal tax filings are all in order. The second path to becoming an enrolled agent is only open to current or past employees of the IRS. Although they must complete most of the same steps, if they spent five years in a position that required them to work intensely with the tax code, they may be entitled to skip the Special Enrollment Exam. Enrolled agent status is not automatically forever; the status must be renewed every three years. In order to maintain their status, enrolled agents must renew their Preparer Tax Identification Number each year and complete 72 hours of continuing education every three years.
How Does an Enrolled Agent Compare with a Certified Public Accountant?
Enrolled agents are federally licensed accounting professionals who can practice anywhere in the country. They focus strictly on taxation. While enrolled agents must pass the IRS’ Special Enrollment Exam, they have no formal educational requirements to meet before sitting for that exam. By comparison, a certified public accountant, who is certified at the state level and therefore limited in the area where they can practice, may specialize in taxation or choose to focus on a broad range of other financial areas. In addition to passing the Uniform CPA Exam, Certified Public Accountants must fulfill specific education and experience requirements to be certified. Both types of financial professionals are allowed to offer tax advice, prepare tax returns and represent their clients in front of the IRS in the event of a dispute.
How Do You Find an Enrolled Agent?
In many states, enrolled agents are free to mention their credentials as they advertise their services. But, as Forbes states in its article “Enrolled Agents Deserve More Respect,” laws in some state that were intended to protect the Certified Public Accountant designation sometimes block federally licensed enrolled agents from advertising themselves as anything more than accountants. Whatever the situation, the easiest way to locate an enrolled agent in your area may be to visit the National Association of Enrolled Agents’ online referral service.
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If you are searching for someone to provide reliable tax advice, consider your options carefully. With their specialized expertise in taxation and their ability to represent clients in front of the IRS, enrolled agents in finance can be a smart choice.