So, you want your clients to know you're an expert?
Passing the EA Exam and adding those prized letters after your name is your path to increased credibility and a more prosperous career.
What is an Enrolled Agent?
An Enrolled Agent is a federally authorized tax professional who has demonstrated their expertise in taxation by passing the three part Special Enrollment Examination. They are taxpayer advocates who can not only file returns, but can assist clients in all manner of IRS examinations, collections, and appeals.
The Enrolled Agent status is the highest credential recognized by the IRS and it is recognized across all 50 U.S. states. Enrolled Agents can prepare tax returns in any state without the need to participate in state based continuing education programs and can represent any taxpayer before any office the IRS — even if they did not prepare the return.
What can an Enrolled Agent do?
As a tax preparer, you are your client’s best defense against IRS enforcement issues. Ensuring that the proper forms are filed is your duty. But, as you may know, there aren’t many regulations in place to ensure that other tax preparers have their customer’s best interest in mind. Those that are paid to prepare taxes must legally hold a Preparer Tax Identification Number (PTIN), but receiving this requires nothing more than a quick registration on the IRS website.
These low barriers to entry are great for those considering a move into the tax industry, but these low barriers also open the door to vast amounts of competition, cases of negligence, and occasional fraud.
As an Enrolled Agent, you will differentiate yourself as a tax expert by passing the three-part EA Exam, but what can you do that is different from the duties of a normal tax preparer? The opportunity lies in representation.
Representation – Practicing Before the IRS
One of the bestselling points to earning your EA is the ability to have unlimited representation rights before the IRS. This allows you to represent any taxpayer on any tax matter, before any office of the IRS, no matter who prepared the return.
But, what does it mean to practice before the IRS? According to the legalese, “Practice before the IRS” comprises all matters connected with a presentation to the IRS relating to a taxpayer’s rights, privileges, or liabilities under laws or regulations administered by the IRS. Such presentations include but are not limited to the following:
- Preparing documents (this does NOT include preparing a tax return)
- Filing documents
- Corresponding and communicating with the IRS
- Representing a taxpayer at conferences, hearings, or meetings with the IRS
- Rendering written advice with respect to any entity, transaction, plan, or arrangement
In other words, practicing before the IRS allows you to be a taxpayer advocate, handling a variety of tax resolution issues. Oftentimes, these services are billed hourly depending on the service being rendered and the complexity of the issue.
Office of Examinations
To combat tax fraud and fly-by-night tax operations, as well as the occasional mistake, the IRS audits tax returns.
In 2015, there were 1.2 million households audited and, while this is only equates to about 1% of all filers, having the ability to assist taxpayers when they are the subject of an examination is invaluable.
In general, there are two types of audits. The first is a correspondence audit in which the IRS is looking to confirm information entered on the tax return. The second is the in-person examination. Oftentimes these issues can be easy to resolve, but that doesn’t mean they are any less nerve-wracking for the taxpayer.
As an EA, you can assist a client through their examination and help them determine if their taxes were correctly paid or if adjustments need to be made. As you know, most tax controversies are better resolved sooner rather than later.
Office of Collections
When the IRS is attempting to collect a tax debt that is enforceable, they utilize the IRS Office of Collections. As an Enrolled Agent, you can assist clients in establishing Offers in Compromise (making an offer to pay less), and creating Installment Agreements (payment plans). Additionally, you can assist in extending collection periods (giving the IRS more time to collect and the taxpayer more time to pay), abatements (reducing penalties), releasing liens, and preventing a levy (seizure of property).
A True Taxpayer Advocate
No one wants to have an issue with their taxes. But, with the amount of seasonal, unenrolled tax preparers and the complication of the tax code itself, issues will arise. As an Enrolled Agent, you can assist clients when they need you most. The ability to have unlimited representation rights allows you to take your practice from seasonal to annual and grants you the ability to grow your practice as much as your ambition and dedication will allow.
Are you ready to move into tax representation?
Enrolled Agent Salary: How much is the EA designation worth?
Preparing for the EA exam requires focus, dedication, and a lot of hard work. After many long nights of studying key concepts or memorizing IRS forms and publications, you may even ask yourself, “is this really worth it?” Well, as you already know, the answer is a resounding “YES!” But, if you still find yourself doubting the value of the EA designation, these facts will surely keep you motivated.
The EA designation will allow you to earn, on average, $27,000 more per year than an uncredentialed tax preparer. While significant, this average is just the beginning. So, how much can you truly earn as an Enrolled Agent? As much as you are willing to work for.
There are many employment opportunities available to Enrolled Agents, especially those with experience. EAs are needed by tax prep firms, accounting firms, corporate accounting departments, law firms, investment firms, and banks. According to PayScale.com, entry-level EAs can earn between $11.50-$25.22 an hour, or $25,183-$64,074 a year. With two to three years of experience, mid-level Enrolled Agents can boost their pay to $12.85-$30.67 an hour, or $32,951-$76,403 a year. Senior-level EAs with more than 5 years of experience working at tax or finance firms can earn a substantial salary, averaging between $66,000 and $127,000 annually.
Enrolled Agent salaries at the large tax preparation firms are often on the lower end of the range; however, the added job security, benefits, and learning opportunities make them a popular choice for newer Enrolled Agents.
Perhaps one of the most overlooked aspects of becoming an Enrolled Agent is the ability to be your own boss. As an EA, you’ll have the knowledge and credibility needed to start your own successful tax business, or to grow your existing business. Since you’ll be able to advise, represent, and prepare returns for individuals, businesses, estates, trusts, and more, you can also attract new clients. Not only do these services allow you to expand your reach and command higher fees, but they also allow you to work year-round, instead of just during tax season. As you build your proficiency and grow your client-base, your income will follow!
How to Become an Enrolled Agent
You already know that the EA license can help you take your career in tax or accounting to the next level. Now, you need to know how to become an Enrolled Agent. You probably have a lot of questions about the process, and may even be feeling a little overwhelmed. But, don’t worry… This step-by-step guide on how to become an Enrolled Agent will be your road map to success!
Step 1: Obtain a Preparer Tax Identification Number (PTIN)
Anyone who prepares or assists in preparing federal tax returns for compensation must have a valid PTIN. If you don’t already have a PTIN, you can apply for one online through the IRS website, www.irs.gov/ptin. Even after you become an Enrolled Agent, your PTIN will need to be renewed annually.
Step 2: Pass the Special Enrollment Examination (SEE)
Unlike CPAs and attorneys, there are no education or experience requirements to become an Enrolled Agent. To prove your competency in taxation and earn your EA license, you’ll need to pass the IRS Special Enrollment Examination (SEE), or the EA exam, as it is more commonly known. The exam consists of 3 parts:
Part 1 — Individuals
Part 2 — Businesses
Part 3 — Representation, Practice & Procedure
You have 2 years to pass all 3 parts of the exam, so we recommend taking your time and focusing on only one part at a time. Each part will test your knowledge of advanced tax topics, so be sure to select an Enrolled Agent Exam Review course that presents the information clearly and concisely, covers all of the key concepts, and also fits your learning style.
The exam is administered by Prometric and is available from May 1st through February 28th of each year. There is no testing during the months of March or April. When you’re ready to take your first part, you can schedule a day and time to take the exam at a Prometric testing center, either online or over the phone. There are hundreds of testing centers nationwide and internationally, so there’s a good chance that you’ll be able to find one near you.
Step 3: Submit Form 23
After passing all 3 parts of the Enrolled Agent Exam, you’ll need to complete and submit Form 23, the Application for Enrollment to Practice before the IRS. The IRS will conduct a background check to ensure that you have not committed any crimes which could be considered a breach of public trust, such as fraud, as well as a tax compliance check, which includes a thorough review of your tax transcripts. Your enrollment could be denied if you’ve failed to file or pay your taxes in a timely manner.
It can take up to 60 days for the IRS to process your application. You will receive your Certificate of Enrollment in the mail after clearing the background and tax compliance checks.
Step 4: Maintain Your Enrolled Agent License
Enrolled Agents are required to renew their license every 3 years. You will also be required to complete 72 hours of Continuing Education during that 3 year period, with a minimum of 16 hours per year, to keep your license active. We recommend completing 24 hours each year to avoid falling behind on your CE requirement.
Now that you know how to become an Enrolled Agent, it’s time to put your plan in action and get started!
Enrolled Agent Exam: Tips To Pass On Your First Try
Being an Enrolled Agent allows you to command higher fees, work across state-lines, and establish yourself as one of “America’s Tax Experts.” But, to claim the title of Enrolled Agent and all of the benefits that come with it, you will first need to pass the Enrolled Agent Exam. The Enrolled Agent Exam consists of three unique tests that cover individual taxation, business taxation, and representation.
Here are our tried and true tips for passing the Enrolled Agent Exam on your first try!
Planning Your Approach
The most important tip for passing the Enrolled Agent Exam is to be consistent with your study schedule. Allow yourself sufficient time to truly learn the material and choose days where you can devote a few hours to your studies without distractions. Your study time will be based on your overall experience and comfort level with the topics that appear on the Enrolled Agent Exam, but on average, you should plan for 1.5 to 2 months of preparation per part.
In addition to being consistent with your studies, it is important that you choose an Enrolled Agent Exam Review course that is comprehensive, yet focused. Some Enrolled Agent Exam Review courses include irrelevant information which won’t appear on the real exam, wasting your time. Be sure to look for a program that offers accessible material, a large study bank of questions that are paired with informative explanations, and simulated practice exams which can help you determine when you’re ready for the real exam.
Remember, once you have your study plan in order, you have to stick with it! Creating a habit and studying regularly will help you tackle difficult subjects without stress, as you can break them down into manageable, bite-sized pieces. It will also prevent you from falling behind in your studies, ensuring that you stay on track to pass the Enrolled Agent Exam. Pick a time of day that works best with your busy schedule. For some of you, this will mean studying in the evening after a long day at work. For others, you may find that mornings work best. It doesn’t matter what time of day you choose to study, just be sure that you pick one that you can keep long term.
Scheduling The Exam
A big mistake that many candidates make is scheduling their exams too far in advance. This forces them to take the exam, even if they do not feel that they are prepared to pass. You only have four attempts a year to take and pass any part of the exam. With the $112 registration fee for each exam, failing can be costly.
For these reasons, we highly recommend using practice exam simulations before scheduling your Enrolled Agent Exam. By doing so, you can familiarize yourself with the format of the tests and make sure that you have fully mastered the key topics prior to the big day.
So, don’t schedule your Enrolled Agent Exam until you feel you’re ready. In most cases, you can even schedule up to a week before the day you want to take the exam.
On Test Day
At this stage, you’ve practiced and prepared for weeks. You’ve taken the necessary practice exams and you’re confident in your knowledge of the material. Now comes the real preparation: relaxing. Be sure to have a good night’s sleep, eat a hearty but healthy breakfast, and have a positive mental outlook. On test day, enter the building with the confidence that you will succeed and you will surely do so!
Stick with our tips and you’ll pass the Enrolled Agent exam in no-time!