Enrolled Agent FAQ*
Enrolled Agents (EAs) are federally-licensed tax practitioners who may represent taxpayers before the IRS when it comes to collections, audits and appeals. As authorized by the Department of Treasury’s Circular 230 regulations, EAs are granted unlimited practice rights to represent taxpayers before IRS and are authorized to advise, represent, and prepare tax returns for individuals, partnerships, corporations, estates, trusts, and any entities with tax-reporting requirements. Enrolled agents are the only federally-licensed tax practitioners who specialize in taxation and have unlimited rights to represent taxpayers before the IRS. The enrolled agent profession dates back to 1884 when, after questionable claims had been presented for Civil War losses, Congress acted to regulate persons who represented citizens in their dealings with the U.S. Treasury Department. Enrolled agents’ expertise in the continually changing field of taxation enables them to effectively represent taxpayers at all administrative levels within the IRS.
PRIVILEGE AND THE ENROLLED AGENT
The IRS Restructuring and Reform Act of 1998 provides federally-authorized practitioners (those bound by the Department of Treasury’s Circular 230 regulations) with a limited client privilege. This privilege allows confidentiality between the taxpayer and the enrolled agent under certain conditions. The privilege applies to situations in which the taxpayer is being represented in cases involving audits and collection matters. It is not applicable to the preparation and filing of a tax return. This privilege does not apply to state tax matters, although a number of states have an accountant-client privilege.
CONTINUING EDUCATION
In addition to the stringent testing and application process, the IRS requires enrolled agents to complete 72 hours of continuing education every three years in order to maintain their active enrolled agent license and practice rights. NAEA members are held to a higher standard than the IRS’ minimum 72 hour continuing education requirement. NAEA members must complete 30 hours of IRS-approved continuing education hours each year (which would lead to a total of 90 hours for each three-year EA enrollment cycle period). Because of the expertise necessary to become an enrolled agent and the requirements to maintain the license, there are only about 53,700 practicing enrolled agents.
ETHICAL STANDARDS
Enrolled agents are required to abide by the provisions of the Department of Treasury’s Circular 230, which provides the regulations governing the practice of enrolled agents before the IRS. NAEA members are also bound by a Code of Ethics and Rules of Professional Conduct of the Association.
Only enrolled agents are required to demonstrate to the IRS their competence in all areas of taxation, representation and ethics before they are awarded unlimited representation rights to represent taxpayers before IRS. Unlike attorneys and CPAs, who are state-licensed and who may or may not choose to specialize in taxes, all enrolled agents specialize in taxation.
Taxpayers who find themselves in tax trouble are allowed to represent themselves before the various administrative levels of the IRS. However, most taxpayers facing an IRS collection action, an IRS audit of any sort (whether the IRS asks for mounds of documents by mail or requests an in-person examination), or an appeal of any collection or examination action would be wise to send a qualified tax expert in his or her place. Taxpayers who are represented have a guide who can lead them through the process, someone authorized to speak on their behalf (and in their place) and fight for the best possible outcome. Enrolled agents are authorized by the IRS to represent taxpayers before the IRS; every enrolled agent has passed testing on representation.
Enrolled agents advise, represent and prepare the tax returns of individuals, partnerships, corporations, estates, trusts and any other entity with tax reporting requirements. EAs prepare millions of tax returns each year and their expertise in the continually changing field of taxation enables them to effectively represent taxpayers audited by the IRS. In addition to tax preparation and tax representation, many enrolled agents offer other business-related services, which may include:
- Bookkeeping
- Financial planning or budgeting
- Payroll services
- Financial statement preparation
- Mortgage assistance
Because enrolled agents have such diverse backgrounds and may offer a variety of services, it is important to talk with your enrolled agent about how best to put his or her expertise to work for you.
In addition to the stringent testing and application process, the IRS requires enrolled agents to complete 72 hours of continuing education every three years to maintain their licenses. NAEA raises the bar even further—its members are required to complete at least 90 hours in a three-year period.
Yes. Every year there are numerous changes to the tax laws and tax code. The National Taxpayer Advocate has identified the complexity of the tax code as the most serious problem facing taxpayers and the IRS alike. A recent review of the tax code revealed that it includes 3.8 million words and that there have been approximately 4,428 changes to the code over the preceding ten years, an average of more than one a day. Frequently, provisions are added and others expire. Some provisions are indexed for inflation, so they change as well. Some are effective at the beginning of the year, while others become effective on the date a particular bill or law is signed. EAs take continuing education courses each year to keep up with the changes and have research tools at their disposal to constantly monitor updates. Most taxpayers do not have the time, desire or the research tools necessary to keep up with the tax code each year. When you choose an enrolled agent, you know your preparer keeps up with the rules and regulations and will use this expertise to do the best job possible for you.
Your tax needs are best served by an enrolled agent. However, no matter who you hire there are certain things to keep in mind.
- Always use a qualified professional to prepare your return.
- Preparers should always sign the returns and include their Preparer Tax Identification Numbers (PTIN).
- Beware of preparers who encourage you to lie or otherwise modify your information in order to get a bigger refund.
The taxpayer is responsible for what’s on a tax return. Reputable preparers will ask to see receipts and will ask multiple questions to determine whether expenses, deductions and other items qualify. By doing so, they are trying to help their clients avoid penalties, interest or additional taxes that could result from an IRS examination.
*FAQ © 2014 National Association of Enrolled Agents