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  • Writer's pictureLiz R

Should I hire a CPA or an EA? Wait, what's an EA?

I have a lot of conversations with people when they say they need an accountant to file their taxes. An accountant does accounting and a tax professional completes tax returns. There is a big difference BUT people use the terms interchangeably because some accountants also do tax work and some tax professionals also do bookkeeping and accounting.

Here's what really matters: Does the person you are hiring have the proper education, training and/or (if required) license to either prepare taxes or set up your business books.

CPAs are regulated by the state in which they are conducting business. Some CPAs do audit work, others do strictly accounting and yet others focus on taxation. CPAs are authorized to represent you before the IRS but not all choose to do so. When choosing a CPA be sure to double check that they are well versed in taxation.

Enrolled Agents are authorized by the IRS to represent clients by taking a 3 part test that solely focuses on taxation of individuals and businesses. The third part of the test is an ethics exam that revolves around Circular 230. Circular 230 is the guide by which all EAs must adhere to. In theory an EA should have a lot of tax knowledge since they are required to meet minimum continuing education credits.

If your tax professional is not an EA or CPA that's ok too! Many qualified and educated professionals do not have a designation. A good tax professional (regardless of designation) will take continuing education throughout the year and keep up to date on all new tax laws. They will even take the IRS' Annual Filing Season Program (AFSP) to stay on top of the changes that occur each year. A non-credentialed professional will have a record of completion from the IRS.

I'd love to hear about your experiences with CPAs, EAs or other tax professionals. Did you find that their credentials meant more to you than their experience or vice versa? Let me know in the comments!

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