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.