If you’re thinking about hiring a professional to do your taxes, you may have discovered the acronyms CPA and EA. These are common designations that appear in the accounting and tax community. You’ll typically see them listed after someone’s name like John Brown, EA, or Mary Smith, CPA. The CPA and EA classifications can be confusing if you are not familiar with the terminology. So… what are they? And which one is better?
Certified Public Accountant (CPA)
First, what is a CPA? CPA is an acronym for Certified Public Accountant. Certified Public Accountants may have extensive knowledge and understanding of many aspects of accounting including auditing, financial planning, and tax. Plus, they can issue reports on financial statements. If you’re looking for a broader scope of expertise, CPAs are the way to go.
CPAs are licensed by a state board of accountancy. CPAs must abide by the ethical rules and regulations determined by each state’s board of accountancy or CPA society. Many are also members of the American Institute of Certified Public Accountants (AICPA), which has its own Code of Professional Conduct.
To qualify as a CPA, candidates must pass a rigorous, four-part examination. In addition, they must fulfill education and experience requirements. The CPA exam is the same across states, but the exact education and experience requirements can differ from state to state. With that said, many states require 150 credits (with a certain number of accounting credits) and at least one year (2,000 hours) of public accounting experience.
On top of the initial college credits, exam, and experience conditions for CPA licensure, each state has specific rules for maintaining it. CPAs typically need a minimum of 40 hours per year of continuing professional education (CPE) with four hours in ethics.
Enrolled Agent (EA)
Next, what is an EA? EA is an acronym for Enrolled Agent. Enrolled Agents are federally-authorized tax practitioners who focus specifically on tax. This is the highest accreditation awarded by the IRS. Their responsibilities may involve representing clients in tax audits, appeals, and collections, providing tax advice, and preparing and filing tax returns.
Qualifications to become an EA include passing a three-part examination, applying to the IRS, and passing a background check.
Additionally, to maintain EA status, Enrolled Agents are required to complete 72 hours of continuing professional education (CPE) every three years. Each year, there is a minimum requirement of 16 hours earned and two hours must be in ethics. All continuing education must be through an IRS-approved CPE provider. EAs must also comply with the ethical standards inaugurated by the Department of Treasury. Members of the National Association of Enrolled Agents (NAEA) must maintain even higher standards for continuing education. The NAEA also has its own Code of Ethics.
Now that you know more about the similarities and differences between CPAs and EAs, which is better?
CPA vs EA
Certified Public Accountants and Enrolled Agents are both highly qualified, knowledgeable, and experienced professionals who are required to take continuing professional education as well as maintain high ethical standards. Not to mention, both tax specialists (whether CPA or EA) may represent clients before the IRS. Both CPAs and EAs are equally qualified to work on tax returns and tax planning engagements.
As far as differences go, Enrolled Agent status is given at the federal level, while Certified Public Accountant licensure is done at the state level. Also, an EA specializes specifically in taxation, whereas a CPA has a broader spectrum of accounting knowledge such as auditing and financial statement preparation as well as taxation.
While both must pass their respective exams, some compare the CPA and EA exams like this: the CPA exam is a mile wide and an inch deep while the EA exam is only a quarter-mile wide but a lot deeper.
Ultimately, each must pass difficult, exhaustive examinations and can handle demanding work for clients. Whether you work with an EA or a CPA (or are trying to decide between the two), you can rest assured that both are exceptionally skilled professionals when it comes to taxes.
Now that you understand the similarities and differences of CPAs and EAs, you’ll be better prepared to make a selection and have full confidence in your tax specialist.
P.S. The intricacies of tax planning and preparation can quickly become tedious, time-consuming, and confusing. But don’t let that stop you from offering tax planning and preparation to your clients. Learn all about how to add tax prep and planning into your service model in this on-demand webinar: How to Incorporate Tax Prep & Planning Into Your Firm's Service Model
About the Author
Katrina Ivancic, CPA, is a Tax Manager on team XYTS. She is a master of tax return preparation and reviews and looks forward to taking on tax planning projects. When Katrina isn't working in the world of taxes, she's likely outside getting active. Her main hobby is running, and in her free time, she can usually be found getting in miles, enjoying every stride.
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