Enrolled Agent, CPA, Tax Attorney or ASFP, Which Career to Choose?

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With the existence of government programs such as HARP and the Affordable Care Act, capitalization rules and late extender laws, the tax code is getting ever more complex. Regardless of whether this is a good thing, there is no doubt that the opportunity to have a great career while serving the public is alive and well in the field of Taxation.

Anyone may prepare their own or someone else’s tax return. But if they wish to accept payment, they must be licensed, either by their State, Federally or both. When considering a career in the tax field you’ll need to balance the amount of education required to become a licensed tax professional and to maintain your license. Here’s a quick breakdown of what it takes to become a licensed tax professional.

Note: ALL tax professionals must have a current PTIN – preparer tax ID number – which is renewed annually.

EAs – Enrolled Agents

Enrolled Agents must pass three rather tough examinations. They cover: Individual, Businesses and Representation, Practices & Procedures. All three parts relate to tax law, practice, procedure and ethics. Once a tax professional passes the exams, the IRS does a background check and reviews the candidate’s personal and business compliance with US tax filing and payment procedures. This can take one month to six months, depending on when the application is filed – and the individual’s compliance history.

Or, IRS agents with 5 years or more in certain disciplines, may get their EAs when they leave the Service.

Once the IRS issues the new EA his or card, they may be added to IRS and state powers of attorney immediately.

The IRS requires 72 hours of continuing education every 3 years with a minimum of 16 hours every year. NAEA (other organizations may differ) require 30 hours per year, for continued membership. http://www.irs.gov/Tax-Professionals/FAQs:-Enrolled-Agent-Continuing-Education-Requirements

CPAs – Certified Public Accountants

An addition to an Accounting major for their bachelors degree, Certified Public Accountants must pass 4 exams: Auditing and Attestation, Business Environment and Concepts, Financial Accounting and Reporting and Regulation. Because the role of the CPA is much wider, only about 10% of the exam focuses on tax issues.

In addition, they must spend a year or two getting experience in a CPA firm or working under the direction of a CPA in a corporate environment before they may become certified and be added to IRS power of attorney forms. State rules will vary.

CPAs also have significant continuing education requirements, which are generally determined by the State organizations. For example, in California they are required to complete 80 hours every two years with a minimum of 20 hours a year, including a board approved 2-hour regulatory review course every 6 years. http://www.learningmarket.org/page.cfm/ID=26

Attorneys – Tax Attorneys

Although you don’t need a law related undergraduate degree, you will require a JD from law school. With that in hand you can study for the bar of the State in which you wish to practice.

Most State bars require that members undertake at least 25 hours of continuing legal education every three years. http://mcle.calbar.ca.gov/ of course, there is no requirement that any of this must be related to tax laws.

The American Bar Association does have a section on Taxation that members can join. There doesn’t seem to be any minimum tax education or experience requirement for members showing on their website or their bylaws. But this section is active in writing, lobbying and providing useful educational resources for their members. http://www.americanbar.org/groups/taxation.html

AFSP – Annual Filing Season Program – certificate of completion

Historically, only two states in the Union had any licensing requirements for tax professionals – California and Oregon. Maryland just joined this group, and New York requires some form of registration and continuing education. In the entire rest of the United States – anyone at all can hold themselves out as tax professionals. No education, license or anything needed. Not even any minimum literacy standards.

The IRS tried to create national standards for tax professionals. That was shot down by a lawsuit. Instead, the IRS has offered a voluntary registration program called the AFSP – Annual Filing Season Program. This is not a license. But it does provide a certificate of completion that can be printed out and displayed by the preparer. To qualify, the tax professional must take 18 hours of continuing education every year, including a 6-hour annual update, a 100 question annual exam, and at least 2 hours of ethics. There are some less stringent requirements (15 hours of CPE) for folks meeting certain other minimum standards.

Check before you choose

While not being licensed at all is the easiest option and requires no continuing education – it also suggests to your potential clients that you might be out of touch with the changing tax laws.

The IRS’s voluntary program, which requires annual testing is such a burden that, perhaps it’s time to move up to professional chain.

If you’re serious about tax as a career you might wish to pursue a more formal designation. Becoming an Enrolled Agent is a logical stepping stone. You don’t need a college degree. You can become useful in a tax office (or your own practice) instantly, because you can be added to the Power of Attorney forms. And your earning power increases. With your EA, you can earn enough money to finish college and get your CPA. Or you can sit the biennial Tax Court examination and represent taxpayers before the federal Tax Court.

While TaxMama® is clearly a huge proponent of the Enrolled Agent, everybody’s situation is different and you need to make your decision based on what is right for you.

Image Credit: You Choose by Alberto Valera on Flickr

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