Where an Enrolled Agent fits in the accounting landscape

The concept of Enrolled agents was created with the passage of the Circular 230 regulations after the Civil War, in 1884 with the so-called Horse Act (to combat fraud in the requests for reimbursements for horses taken during the war)

CPAs were established in law, soon after, on April 17, 1896
according to Flesher, D.L., Previts, G.J. & Flesher, T.K.,Profiling the New Industrial Professionals: The First CPAs of 1896–97 (Business & Economic History, volume 25, 1996

The big difference in the focus and creation of EAs and CPAs is – EAs were created to help people who needed to intercede with the Federal government on their behalf. While CPAs were created to establish uniformity in accounting.

Enrolled agents are regarded by the IRS as the highest level of tax professionals in the country – because all our CPE must be federal income tax related.

Current IRS promotions state the EA is “the highest credential the IRS awards” and an “elite status.”

Welcome Everyone.

My name is Eva Rosenberg.

I am an Enrolled Agent (EA) and the publisher of the award winning website TaxMama.com. I am a published author in the Tax field with books such as “Small Business Taxes Made Easy, 4th edition” and “Deduct Everything” I teach the most comprehensive course for passing the EA Exam on the internet as well as other tax courses at CPELink.com

I come by my credentials honestly, having earned a BA in accounting, an MBA in International Business and having earned the EA the hard way – by passing the exam.


When you hire an EA, what does an EA bring to the table?

While enrolled agents are not required to have a degree in accounting, many do have at least one degree, sometimes more – and/or have many years of work experience in the accounting or bookkeeping field.

Better yet, because so many EAs come to the profession later in life, they also have a variety of business skills, specialized industry expertise, life skills and licenses – as well as a broad base of contacts within your community.

The backgrounds or prior careers of some of the EAs I have taught or have known?
Engineer, physician, nurse, secretary, PTA mom, truck driver, military, minister, bookkeeping, athlete, law enforcement, national CPA tax manager, mediators, stockbrokers, financial analyst, physical therapist, banking, attorney, notary public, and that just scratches the surface.

Incidentally, EAs are often rather smart and creative people – they simply don’t have the funds or backing to pay for full-blown college degrees. So they use the EA as a springboard to become a CPA or attorney. The person you hire, is apt to be ambitious enough to want to grow with your company or firm – and to become quite a rainmaker.

The EA Exam

The EA exam used to be administered by IRS once a year. It was a two day affair, consisting of 4 exams. IRS would release the questions and answers a few months after each exam was completed. If you didn’t pass any parts, you had to wait a whole year to try again.

Today, it consists of three exams. You can take each one up to 4 times a year within a 10-month window from May – Feb of the next year. The exams are harder than they used to be. And we no longer get the answers, or even sample questions. But, even if you don’t pass the first time, you can finish all three exams within one testing window.

If you don’t pass one of the parts, you normally have up to 24 months to finish the entire process. However, due to the COVID pandemic, you currently have 36 months.

Incidentally, there IS another way to become an EA – without taking the exam. You can work for IRS for 5 years in certain capacities and get your EA automatically when you leave the IRS.


What an EA can do for your firm.

Your top CPA candidate recruit was probably a star in college. He or she is undoubtedly brilliant and driven. However, they cannot perform a simple task like calling IRS and getting information about a client’s notice or requesting a transcript. Because they do have Power of Attorney authority.

Instead, you can hire a brand new EA, even if they have little or no experience. You can put them on a power of attorney along with you from day one. They can log into the e-services database using their own identity, or call the Practitioner’s Priority Service.

A new, inexperienced EA won’t cost you nearly as much as your star CPA candidate.
But they can handle all IRS correspondence (with your oversight and review, of course); make all calls to get levies released; talk to IRS, state and local tax agencies on behalf of the client, set up installment agreements, or prepare offers in compromise documents – and actually speak to the government agencies about routine matters.

How many of those insidious and annoying IRS or state notices do your clients get that someone like this could take off your hands?

Sure, you probably have them (or your assistant) use your POA to go online to IRS’ e-services in your name and download information for you. (Of course you won’t admit that you do that…) But that’s a pretty dangerous thing to do.

a) It’s not ethical to have someone impersonate you on the IRS’ secure website.

b) The IRS taxpayer database is highly private. Using e-services is a privilege and a mark of great trust. Even IRS agents looking up taxpayer information without valid authorization get into serious trouble. Just imagine what happens if you are caught letting someone else log in as you:

  1. You can not only lose your access to the online service, but
  2. the IRS Office of Professional Responsibility is apt to disbar you – and so will your State CPA Society or Bar Association.

c) By allowing someone else to impersonate you, you have demonstrated that you are willing to break the law. You have already moved towards losing your staff’s respect.

d) So is there any reason that staff person shouldn’t do the same thing? The information in that database is ripe for identity theft. Why shouldn’t they create other phony POAs under your name, using your information – and make it look like YOU’RE the identity thief.


Encouraging staff to become EAs and how that can help you

Your new hires will not be CPAs for at least two years because of the testing and experience requirements. But if you encourage your staff to sit for the EA exam, they can become more useful to you in your tax department – even before they qualify for their own POA rights as a CPA.

Your juniors and staff members are recent college graduates. They are fairly used to taking exams. It would not be all that hard for them to pass the EA exam, with a little bit of study.

In fact, your clerical staff have been proof-reading your tax returns and financial statements and tax correspondence. They probably know a lot more about taxation than you realize. They are also excellent candidates for the EA Exam.

Having people become EAs increases their usefulness when it comes to so many of the tedious, day-to-day tasks that don’t require craft and skill – just gruntwork and sitting on hold

Removing IRS and State burdens from your shoulders

My assistant worked her way up from proof-reading to preparing returns, to passing the EA Exam – to taking over all my IRS correspondence and routine phone calls. She can fill out and understand most tax-related forms. She is an EA in her own right now.

Lulu deals with tax audit workpapers. She gathers information from IRS and state to help recover missing information for our clients’ multiple, prior-year tax returns when they have been unable to file (we have an older, ill client in that position right now).

In fact, during the 2 year span of the Homebuyers Credit, Lulu managed a small team of EAs who processed over 1,000 homebuyers Credit returns, dealing with all the IRS rejections (due to their own internal administrative problems – and some lack of clarity in the laws and procedures). I set up the framework and did the research and legal-writing – they fought the battles and got millions of dollars released to brand new homeowners around the country.

As a result of her skillful management of that project, I have now turned over most of my clients to her, as the foundation of her own practice. These days, I devote more of my own attention to teaching and writing. Having my clients in Lulu’s hands, I am certain my clients are receiving the proper level of care and attention.

Improve your IRS audit and collections representation in the process

Over the years, I have seen many tax and accounting offices turning referring out work related to IRS audits and complex collections issues. (In fact, many of those referrals have come my way.) Why?

Most accounting and tax professionals simply don’t have the background and training to deal with these areas of practice. Especially people in practice for many years. This is especially true for the sole practitioner or those with small practices.

For many years, in fact, the exact rules of the game were shrouded in mystery and fear. IRS did their best to keep taxpayers and tax professionals off balance.

However, tax pros who sit for the EA Exam MUST learn these areas of the law. They must become experts in Circular 230 (do you know what that is?) and the IRM – (have YOU read the Internal Revenue Manual?).

In fact, I devote 24 hours worth of class time teaching this in Part 3 of TaxMama’s EA Exam Review course – and another 20 hours in the Lambers Tax Resolution Series.

You cannot pass the EA exam without knowing how to arrange for an installment agreement. You must know how to use a POA properly. You must understand the mechanics of an offer in compromise – and to get an Appeals hearing.

And, at least in my course, you learn how and when to file Tax Court petitions – even without being able to practice before the Tax Court.

Incidentally, even if they don’t actually know the nuances, EAs are in a better position to learn these skills. They already have a strong foundation in collections, and IRS rules of practice. And they are in a position to help you learn more about this, as well.

Having an EA in your office means you can keep this kind of work in-house. How much extra income will that bring in?