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Understanding the Difference between a CPA and an EA

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If you plan to hire someone who can handle and prepare tax documents for yourself or for your company, you may be surprised to know that there are two different professions who are qualified to do just that.  Alternatively, if you are looking to enter a career that is involved in the finance and tax law fields, you might be curious to find that a plethora of careers are available to you that you may not have known before.

If you are confused about the difference between a CPA and EA, below is a description to understand the difference to make your next move.

What is a Certified Public Accountant?

A certified public accountant is an accounting professional who has gained an accounting or related degree, has passed a CPA examination, and has also passed all prerequisite state certification and experiential requirements.

The CPA exam is known to be an extremely difficult exam that usually takes hundreds of hours to study for, and comes in three parts that must be completed within so many months.  If all parts of the exam are not completed within the time frame, then the clock starts over and all parts have to be completed again.  Most people will have to take the exam more than once in order pass and become officially certified. Nearly 50% of test takers do not pass the exam.  All Certified Public Accountants must also complete 40 hours of continuing professional education annually in order to retain their certification.

The CPA exam is designed to make CPAs experts in all tax and accounting matters, which gives them a broad knowledge base to apply laws and regulations.  The job of a certified public accountant has broader opportunities than that of a non-certified accountant.  CPAs are legally permitted to perform more accounting functions and are usually offered a higher pay for their services.

CPA Responsibilities

In essence, an accountant is responsible for recording and reporting financial business transactions.  Technically, this work does not require an accounting degree, although many accountants do hold a related degree.  A non-certified accountant will perform basic bookkeeping tasks, maintenance of business accounts, and manage simple tax matters.

So what is it then that a CPA gets to do?  A CPA can do all of these things and so much more.  CPA’s are allowed to not only maintain but also audit company financial records to help protect a business.  During the audit they will check for errors, misinformation, fraud and overspending.  Certified Public Accountants can also attain financial management positions so that they can oversee a company or organization’s budget.

They are qualified to offer financial advice and even create and analyze budgets.  Finally, a CPA can also help prevent fraud and create strategic plans for the future of the business. CPAs can work in a variety of different contexts, including with individuals, businesses, and even law firms.

What is an Enrolled Agent?

Enrolled agents are those who are granted unlimited rights by the government to represent taxpayers before the IRS.  EAs are allowed to appeal in the place of the individual, business, partnership, estate, trust, or other organization whom they are working with.  Their job is to become an expert in tax law specifically, and to keep up to date with changing tax laws.

The major difference between an EA and CPA is the required education.  Unlike CPAs, enrolled agents are not required to have a college degree.  An EA receives his or her license from the federal government, as opposed to a state license.  They must pass an EA exam, called the Special Enrollment Exam (SEE), or they must have acquired experience working with the IRS in tax matters for at least five years.  While not as broad as the CPA exam, the EA exam still has three sections that require disciplined study.

Tax Law Experts

An Enrolled Agent does not have the extensive accounting knowledge that a CPA does, but they are expected to have a focused and deep understanding of tax law.  Like CPAs they can perform audits, but are somewhat limited in their capacity to do so.  Those that are interested exclusively in working with taxpayers on behalf of the IRS may find that this job suits his or her desires best.

Like CPAs, EAs have the ability to work with a variety of people and organizations before the IRS.  They may both find themselves even working in the same law firm.

Should You Become a CPA or an Enrolled Agent?

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If you are interested in a career in finance, you might wonder: should you become a certified public accountant or an enrolled agent? Both jobs entail many similarities, differences, and entirely different paths to get there. If you are struggling to choose between either of these careers, here are a few pros and cons of becoming a CPA or EA.

Enrolled Agent (EA)

      • Enrolled Agents Are Not Required to Have a Degree. Yes, you heard that right. Enrolled agents have the privilege of not having to have a college degree. However, although Enrolled Agents do not need to have a college level education, they are still required to have extensive tax law knowledge.In order to prove this, you must follow one of two options: work for the IRS in a tax-related capacity for five years, or take a comprehensive exam, called the Special Enrollment Examination (or SEE). If you take the SEE, you will need to put in as much studying as possible to be well prepared for the exam. The exam consists of three parts, which all pertain to entirely different aspects of tax law.These parts are 1) Tax law regarding individuals, 2) Tax law regarding business, and 3) Representation, reviews, and procedures. There are many materials available to study from, but the best EA review courses include mock exams and various resources.
      • No Representation Limitations. Enrolled agents, certified public accountants, and licensed attorneys are the only positions allowed by federal law to represent taxpayers without any limitation. This is one of your biggest advantages of becoming an Enrolled Agent versus a non-certified accountant.This allows you a higher annual salary as well as more stable job security, as more people may seek your professional services to represent them in court. If you are interested not simply in organizing someone’s taxes but also applying tax law in person in real time, this may be a thrilling route for you.
      • Diverse Career Opportunities. As an enrolled agent, you are not simply restricted to court proceedings. If you would like to one day open your own tax practice, your designation as an enrolled agent will rank you a high in the competition amongst your peers. Because the IRS deems an enrolled agent as elite status, you will always be in demand.Employers will see your status as an enrolled agent and automatically know that you hold extensive knowledge on tax related laws and issues. They will know that you are able to organize and account for someone’s taxes, can consult on estate and gift taxes, help companies with their employment taxes, advise taxpayer’s on their retirement planning, and much more.

Certified Public Accountant (CPA)

  • Degree Required, and More. Certified public accountants are expected to be highly knowledgeable in all areas of accounting, finance management, and consulting. This requires at least a bachelor’s degree, and many go on to gain a master’s in finance or an MBA afterward. Certified public accountants must have a broader knowledge of finance than do enrolled agents, and thus their schooling is much more difficult and intense.Competitiveness on college campuses is extremely high, as students have to fight the grading curve and compete with each other to obtain the best internships. You must also pass the CPA exam, which is an exceptionally difficult exam in which about half of all people fail, especially on their first try. People who pass the exam will usually put in hundreds, if not over a thousand hours of studying to complete all three parts.
  • Broader Job Prospects. With such extensive education, it is no wonder that their job prospects are broader. CPAs can become accounting experts in forensics, the environment, research, IT, international accounting, and so much more. In addition, certified public accountants still have unlimited rights granted to them before the IRS to represent taxpayers.Those looking for diverse career opportunities may find this certification gives them just that. Despite this, there are many certified public accountants that will work together with enrolled agents as a team at a law firm.
  • Higher Salary. Certified public accountants can make a considerable CPA salary, depending on their position and experience. It is even possible to make it into the triple digits. This is less common with enrolled agents, who tend to make less than their CPA counterparts.