I bet every Enrolled Agent who read that headline is going to read this article. So let’s deal with that first.
The headline is wrong.
So is a headline that says you should ALWAYS hire an Enrolled Agent (EA). Or that you should always hire a CPA.Or that you should never hire a CPA. What I’m talking about are absolutes when it comes to tax strategy, strategy implementation and tax return preparation.There are no absolutes, one size fits all solutions.
Unless you have a very simple tax return with just W-2 income and maybe some interest income, you’re going to face more tax questions than you can learn from reading quick little blog entries like this. As painful as it may be, you can’t find sophisticated tax planning strategies for free on the Internet. You need customized, personal attention.
Let’s start with the person you should actually go to for your tax planning, implementation and tax return preparation.
Tax planning is generally done by a CPA, tax attorney or an EA. Strategy work like this requires more than a reactive knowledge of tax law. You want someone who doesn’t just respond when you ask a specific question. You want someone who can take your goals and objectives, meld that in with your current and most likely future situation and create a strategy. It takes more than just a basic knowledge of tax and business to get there.
Generally speaking, if you are dealing with significant grey areas, Tax Court representation or international businesses, then you’ll need a Tax Attorney. A Tax Attorney can also give you the best protection against subpoena power.
If you need someone with tax experience and you’re working with business structures (new or established), a CPA with tax experience will have the accounting background you need. CPAs are required to have a 4 or 5 year college degree, spend time (as much as 2 years) in internships and pass a rigorous test.
An EA may also have the same accounting education and experience, but it is not required for licensing. The licensing is done by the IRS, not an independent body as is the case with CPAs or attorneys. The EA test looks at tax knowledge, and not any business structure, financial or accounting knowledge.
If you’re taking a position that is more aggressive or isn’t a clear black and white decision, a CPA can give you a more well-rounded standing. The AICPA (American Institute of CPAs) will, on occasion, take up positions against the IRS and provide resources to CPA in tax strategies, audit strategies and other tax help.
Of the three, you will, on average, pay less money for an EA.
What’s the best choice? It depends on your circumstances. You don’t need a tax attorney, if you have a simple tax return. And, on the other hand, an EA without accounting training could get you in a lot of trouble with a corporate tax return.