Learn how to choose the best tax professional for your company.
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Excellent
by Stephen Sylvester
Stephen Sylvester, CPA helps CPA and finance firms turn expertise into new clients. By transforming esoteric technica...
Updated on: November 15, 2023 · 3 min read
Businesses rely on competent, reliable, and ethical tax practitioners to ensure compliance and legally minimize their tax burden.
Widely recognized tax credentials include enrolled agent (EA) and certified public accountant (CPA). Both EAs and CPAs handle taxes, while CPAs also offer accounting, attest, and business consulting. The requirements to obtain and keep each credential also differ.
The Internal Revenue Service (IRS) grants the EA credential—the highest it awards—to candidates who pass the Special Enrollment Exam (SEE). Candidates must pass all three parts of the 85-question SEE, which focuses solely on tax.
Former IRS employees who dealt with tax issues for at least five years need not take the SEE.
The IRS does not require any education or experience to become an EA, though EAs must complete 72 hours of continuing education every three years.
EAs enjoy unlimited practice rights before the IRS. This allows EAs to handle any tax matter, including preparation, IRS representation, and consulting.
Other specialties, such as accounting, remain outside the scope of the designation. An EA can provide some of those services legally but lacks any special qualifications to do so.
State licensing boards issue and regulate the CPA designation according to their own rules, but many requirements exist in most or all states.
All states currently require 150 semester hours of college education for new CPA applicants, based on a curriculum determined by each state. CPAs must hold at least a bachelor's degree. Many earn a master's degree or higher because most bachelor's degrees only require 120 semester hours.
CPA candidates must pass all four sections of the Uniform CPA Examination: Auditing and Attestation (AUD), Business Environment and Concepts (BEC), Financial Accounting and Reporting (FAR), and Regulation (REG). REG focuses primarily on tax. The test takes 16 hours in total, though candidates take each section on separate days. Pass rates hover around 50%.
All states require at least one year of experience—sometimes more—though what kind of work qualifies differs by state. Many states require an ethics exam, among other prerequisites.
Continuing education requirements also vary by state. For example, California requires 80 hours every two years, among many other rules.
Like EAs, CPAs can handle any tax matter before the IRS. CPAs, unlike EAs, may also offer attest services, including financial statement reviews and audits. Their extensive credentialing requirements ensure that CPAs possess a broad understanding of accounting, tax, and business concepts.
Either designation may prepare tax returns, represent clients before the IRS, and consult on taxes. Five factors determine whether an EA or a CPA is more appropriate for tax matters:
Both EA and CPA certification indicates a competent professional. Which is more appropriate for a business depends on the unique needs of each company.
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