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You may have heard of Enrolled Agents, but do you know what they do? In this ultimate guide, we will take a deep dive into the history of enrolled agents, what they do, and how to become one. Whether you're considering becoming an enrolled agent or just curious about the profession, this guide will provide all the information you need.
The history of enrolled agents
Enrolled Agents (EAs) have a significant history that dates back to 1884. Their establishment granted citizens the right to represent clients before the Bureau of Internal Revenue, which later became the Internal Revenue Service (IRS). The demand for EAs grew rapidly with the ratification of the 16th Amendment to the Constitution in 1913, providing Congress with the power to impose income taxes on citizens. As the demand for EAs increased, the National Association of Enrolled Agents was founded in 1972, followed by the IRS's implementation of a rigorous exam for EAs in 1973.
Why become an enrolled agent?
Many people become enrolled agents because they have a passion for taxation and want to help others navigate the complexities of tax laws. Becoming an enrolled agent can be a great career move for tax professionals. First and foremost, it allows you to represent clients before the IRS, which can open more opportunities and increase your earning potential. Additionally, becoming an EA can help you stay updated on the latest tax laws and regulations, which can be valuable knowledge for your clients. Finally, the EA designation is recognized nationwide, so you can practice in any state without having to obtain multiple licenses.
What is an enrolled agent?
Enrolled Agents are unique federal tax specialists that play a vital role in the tax community. EAs are licensed tax practitioners with federal distinction. Their unlimited representation rights before the Internal Revenue Service (IRS) make them invaluable allies during audits, appeals, and collections. They have demonstrated their proficiency by passing the rigorous Special Enrollment Examination (SEE) that covers individual and business tax returns, and representation before the IRS. Furthermore, EAs are required to complete ongoing professional education, guaranteeing that their skills and knowledge remain up-to-date with tax regulations.
What does an enrolled agent do?
EAs offer a wide range of services to help navigate the ever-changing landscape of tax laws and regulations. To better understand their duties, let's explore the key services provided by EAs:
Tax Planning and Preparation: EAs are well-versed in identifying tax-saving opportunities, ensuring clients claim all eligible deductions and credits, and preparing accurate tax returns that comply with federal and state regulations.
Representation before the IRS: In the event of an audit, appeal, or collection action, EAs have unlimited representation rights, acting as staunch advocates on behalf of their clients throughout the entire process.
Tax Consulting: EAs offer expert advice on tax implications arising from various financial transactions, such as real estate, business acquisitions, and inheritance, assisting clients in making informed decisions.
Tax Compliance: EAs ensure that businesses and individuals adhere to tax laws, helping them avoid penalties and maintain good standing with the IRS
Tax Resolution: In cases of tax disputes or delinquencies, EAs work diligently to negotiate settlements, payment plans, or penalty abatements with the IRS.
By hiring an Enrolled Agent, clients can expect personalized and efficient services, a
thorough understanding of the tax code, and the peace of mind that comes from
having a dedicated expert on their side. In essence, EAs are indispensable
allies in unraveling the tax maze and achieving financial success.
What are the differences between an EA and other tax professionals?
The answer lies in their credentials and abilities. Enrolled Agents are tax professionals who specialize solely in tax-related matters, including tax planning, preparation, and representation before the Internal Revenue Service (IRS). Unlike tax attorneys, who provide legal advice on tax-related matters, and Certified Public Accountants (CPAs), who are more specialized in accounting, EAs have an exclusive focus on tax-related issues. While tax attorneys and CPAs may have a wider breadth of expertise in various financial areas, only EAs have unlimited rights to represent taxpayers before the IRS, making them uniquely qualified to handle tax disputes, audits, and appeals. Therefore, Enrolled Agents offer valuable expertise that is different from that of other professionals in the industry, which makes them an excellent resource for complex tax problems that require more than mere accounting knowledge.
How to become an Enrolled Agent?
To become an enrolled agent, you must obtain a Preparer Tax Identification Number and pass the Special Enrollment Examination (SEE), which is a three-part exam that covers individual and business tax returns, and representation before the IRS. The exam is administered by Prometric on behalf of the IRS, and you must pass all three parts within two years. Once you pass the exam, you must apply for enrollment by filling Form 23 and pass a suitability check with the IRS.
The salary range for Enrolled Agents
When considering a career as an Enrolled Agent, understanding the potential salary range is essential. While EAs are known for their specialized tax expertise, their compensation can vary based on several factors, such as experience, location, and the scope of their practice. Here's a breakdown of the key determinants of an EA's salary:
Experience: As with most professions, experience plays a significant role in determining an EA's salary. Entry-level EAs can expect to earn between $40,000 and $50,000 per year, while those with more experience may command salaries upwards of $70,000. Seasoned EAs with an extensive client base or specialized niche can earn over $100,000 annually.
Location: The cost of living and demand for tax services in a given area can influence an EA's salary. Typically, EAs in urban centers and high-income regions tend to earn more than those in rural or low-income areas.
Employment Type: EAs can work as independent contractors, employees of accounting firms, or in-house tax experts for corporations. Independent EAs have the potential for higher earnings, but they also assume the risks and overhead costs associated with running their own practice. Conversely, salaried EAs in established firms or corporations may enjoy a more stable income and additional benefits.
Additional Services: Some EAs expand their practices to include complementary services such as bookkeeping, payroll management, or financial planning. Offering these services can increase their overall revenue and, consequently, their salary.
An enrolled agent's salary is influenced by experience, location, employment type, and the range of services they provide. By considering these factors, aspiring EAs can better understand the earning potential in this dynamic and rewarding profession.
Are you ready to kick-start your EA career?
Enrolled Agents have been around for a long time and play an important role in the tax accounting profession. Becoming an Enrolled Agent can be a fulfilling career move for tax professionals. Not only does it offer increased earning potential they are the only tax practitioners with unlimited representation rights and can assist clients in all tax matters regardless of location. The path to becoming an EA takes hard work and dedication, but it can open many opportunities. If you are looking for a career in tax accounting, becoming an EA may be the right path for you. With Coast EA Academy comprehensive program and expert instructors, you'll have everything you need to prepare and ace the exam. Enroll today and take the first step to become a licensed Tax Professional.
By JP Marino, EA
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