Sometimes, it can extremely hard to keep track of taxes and everything that is related to them without omitting something vital and getting penalties from the IRS as a consequence.
When time is short, and work is hard, you can hire tax professionals to take care of your taxes for you. Each of them comes with certain background knowledge and experience; as a result, the fees for their services will differ.
Tax preparers are all over the place, and they’re always eager to offer their services to the customers. While there are many types of tax professionals, the vast majority of the people turn towards two: EAs (Enrolled Agents) and CPAs (Certified Public Accountant).
Before you hire an EA or a CPA, you must know the differences between the two. What do they do exactly? How good are they in their field? Let’s start a brief EA vs. CPA comparison, so you know who to pick when in need.
What’s an EA and What Does He Do?
An enrolled agent is a professional tax advisor that can represent you in front of the IRS. They deal with IRS tax collection, appeals, and audits. An important thing to know is that the agency will grant a person an EA license without having to pass any exams if he/she has worked five years with the IRS. So, you can expect a lot of EAs to be ex-IRS agents.
When it comes to cost-efficiency regarding minor issues like filing taxes, the EA is the best choice you can make. In comparison with a certified public accountant, who is licensed by the state, the EA is licensed by the federal government itself, which means they can represent you in audits and cases of resolution. They automatically have more rights than the CPAs and those rights are unlimited.
If you need to resolve a strife with the IRS, it’s recommended you hire an enrolled agent, since such a professional is incredibly skilled in dealing with them (especially when he/she was an IRS agent before working as EA).
An EA can also deal with out-of-state returns for you as a business owner; their services, however, do not limit only to individuals. They can prepare taxes for a large variety of organizations: corporations, trusts, estates, partnerships, etc., basically for any institution that must report taxes.
What’s a CPA? What Services Does A CPA Offer?
A certified public accountant is a licensed professional accountant that can provide his services to the public. Fundamentally, you should hire a CPA when you have a company, and the bookkeeping becomes gradually more challenging due to the high amounts of money that keep coming in and out your company.
CPAs can specialize in taxes or audits, but they are basically just accountants. Some of them may know a lot about taxes, while others may not be that knowledgeable.
Given that they are free to specialize in anything they want, they might be useful if you own a small business and you deal with tax compliance and personal taxes. However, if your problems are more severe, you should go with an EA.
Just like an EA, a CPA can represent you in an audit – the thing is that you should still opt for an enrolled agent for that. They have unlimited rights to practice because they have been a part of the IRS for a long time and you can be 100% sure that they know everything there is to know about taxes. On the other hand, the CPAs may not be specialized in this area.
Enrolled Agent vs. CPA – Which One Should You Choose?
There is no consensus on which of the two is best for you. It all depends on your specific situations and needs. If you need some additional help with bookkeeping and accountancy services in general, a CPA is what you need. On the other side of the spectrum, if you are in serious conflicts with the IRS, no-one is better at dealing with them than enrolled agents. It’s less likely that anyone else is as versed in the IRS mechanisms and taxation systems as the EAs.
You mustn’t forget that all enrolled agents are tax specialists, whereas not all CPAs are. Another aspect that is quite important is that some EAs could’ve taken the CPA exams instead of the EA one. As a result, they already have the knowledge of the CPAs plus all the expertise they gained throughout their years of practice in the IRS.
Of course, the final choice is entirely yours. You decide which of the two works best for your needs. If none of them appeals to you, you can always choose to hire a tax lawyer/attorney. There are plenty of options out there.