Whether it’s for convenience, to seek for professional help, or any other reasons we may have, there are some who prefer a professional to help in filing for tax returns or any other specific tax related activity. When it comes to various tax issues, which tax professional should you be seeking help from? Knowing that you will be spending money for someone’s professional services, you should also understand that you’re hiring the right person for the job.
At our firm, we use a combination of Tax Attorneys, Enrolled Agents, and CPAs working specifically on the areas they are best at for your case.
The different types of tax professionals: EA vs CPA vs Tax Attorney
For tax concerns, there are three kinds of people you can choose from- Enrolled Agents, CPAs, and Tax Attorneys. In this article, will be talking about the differences of these three and who is the best person to hire based on your situation.
Enrolled Agents (EAs)
First we have Enrolled Agents (EA). An Enrolled Agent is a tax practitioner authorized by the federal government. They have the privilege of representing taxpayers for matters related to the Internal Revenue Service. EAs are able to represent taxpayers before the IRS for any issues relating to collections, audits, or tax appeals. Included in The services that Enrolled Agents are authorized to tax returns for people, corporations, partnerships, estates, trusts and anyone else that is required to report to the IRS.
EAs are Required to pass an examination or they must have worked at the IRS for a specified period of time. They must also pass background check. EAs cannot represent taxpayers in tax court without passing a special, separate exam. Enrolled agents are also the only task professionals who don’t require a state license. They do however, have a federal license and they can represent a taxpayer in any state. Enrolled Agents also don’t require a college degree or any other specific tax related education.
The path to becoming an Enrolled Agent
As mentioned earlier there are two ways that one can become an enrolled agent. By passing a three part examination or having enough work experience for the IRS. You also need to pass a background check. The three part are as follows:
- Part 1- Tax Code for Individuals (100 questions)
- Part 2 – Tax Code for Business (100 questions)
- Part 3- Representation, Practice and Procedures. 100 questions primarily on Circular 230, the Treasury Department guide for practicing before the IRS
You don’t need prior Knowledge on tax preparation to become an enrolled agent. They can even choose not to prepare tax returns.
When should you hire an Enrolled Agent
Some clients who have limited funds available usually go to enrolled agents for their services because they charge less compared to CPAs and Tax Attorneys. Enrolled Agents are great for basic, W2 tax prep.
While it is enticing to get the service is over CPAs or Tax Attorneys due to lower fees they charge, you should act with caution because there are cases when it’s better to seek the help of a Tax Attorney or CPA. If it doesn’t go well, you might even be spending more by hiring another tax professional.
Sometimes a case might be too complex for an enrolled agent to handle, so it’s better to hire an experienced tax professional for that matter. You may choose to hire Enrolled Agents for basic tax preparation, tax planning, miscellaneous tax filings, and other routine matters. If you think your tax situation needs someone who is more equipped take to take on this case then we suggest that you invest your money in someone who can successfully handle it. It may cost you more, but you will be getting successful results in return.
At TRP we use Enrolled Agents for basic tax prep and IRS status checks. Any complex calls, business tax returns or financial analysis, we have our tax attorneys do.
Certified Public Accountants (CPAs)
A certified public accountant is an expert in accounting, specializing in specific accounting areas. There are some who specialize in tax accounting. CPA can also do you representation before the IRS if you’re dealing with an audit or collections. CPAs have degrees in accounting, have at least 2 years of work experience, and have passed the CPA exam.
How to become a Certified Public Accountant
To become a CPA, they must first earn a degree in finance, accounting, administration, or management. Because CPAs can only practice in the state where they are licensed, they should also pick the state where they want to take the exam. For tax resolution and IRS representation, they can represent anyone for any federal or state issue besides Oregon (unless they are specifically licensed in Oregon). The exam is the same for all states. this examination consists of 4 sections and 1,000 questions.
The sections covered in the exam are:
- Auditing and Attestation (AUD)
- Business Environment and Concepts (BEC)
- Financial Accounting and Reporting (FAR)
- Regulation (REG)
When to hire a CPA
Take note that most CPAs don’t specialize in taxation. Most of their time is spent on accounting services. Although CPAs are authorized to provide representation, they are not particularly trained in this area. It’s often not advisable to seek help from a CPA for negotiating tax settlement with the IRS. For example, an Offer in Compromise can be complicated and is a continuous process. This might not be something a CPA is trained to do given their lack of exposure in arguing and handling tax disputes.
If you’re looking for someone to do your basic tax returns that do not require extensive legal analysis, then a CPA may be the best person to go to for a complete tax return preparation. There are lots of multi service tax firms that do Offer In Compromise via CPAs. Most of them are not experts in the area.
At our firm we use CPA’s for certain tax calls that do not require the expertise of a tax attorney.
Tax attorneys are experts in the complex and technical field of tax law. They’re tax professionals that can handle certain things CPAs or EAs can’t. They are authorized to represent you in tax court if they have filled out the proper paperwork. They are more equipped in handling negotiations with the IRS and Dealing with the more complicated matters of taxation.
There are some tax attorneys who have a background in accounting and some tax attorneys prepare tax returns as well. Since there are different types of tax attorneys, you should also make sure that the tax attorney are hiring specializes in what you want them to handle. There are tax attorneys who specialize in corporate tax, partnership taxation, trusts and estates, and tax relief. If you are looking for someone who can help you resolve tax debt other tax problems, then you should hire someone who specializes in tax relief.
At TRP our tax attorneys handle all complex portions of your case. Certain more complex tax returns are also prepared by a tax attorney.
Becoming a Tax Attorney
To become a tax attorney you must complete law school and earn a Juris Doctor (JD) degree. In California, you can still do an apprentice program at a law office or judge. You must pass a state bar examination and moral character review in order to practice law. Many applicants are delayed or not allowed to practice law due to background issues found during the moral character review.
When should you hire a Tax Attorney?
Since tax attorneys are well-versed in tax laws and dealing with IRS negotiations, the best time to seek help from a tax attorney is when you need help in complex matters with your taxes. Some examples may include the following:
If you are being audited
A tax attorney can provide you guidance or give legal representation. An experienced professional can help you in determining the outcome of your negotiation. Tax Attorneys can help you settle your tax debt for less than the amount you owe.
Received an IRS notice
You can reach out to a Tax Attorney for some legal assistance to help with notices. There are different kinds of notices sent by the IRS. Some examples are CP504 (Notice of Intent to Levy), CP91 (Intent to Levy on Social Security Benefits), LT-11 Notice (Intent to Levy and Notice of Your Right to a Hearing). Learn more about these in our post on IRS Demand Letters. A tax attorney can take over the case and respond to your notices. They will provide the best analysis on how to proceed on your case
If you are negotiating with the IRS it can be difficult when you doing it yourself. Especially if you don’t know what the right thing to say to whom. By hiring a tax attorney, you can file a power of attorney to speak to the IRS on your behalf. You would not have to deal with them yourself after that. Tax attorneys can also file your case in tax court. Most EAs and CPAs have not passed the special exam needed for tax court certification.
TRP is focused on back due debts. We provide expertise in Offer In Compromise and IRS Negotiations. Our tax attorneys are experienced in tax resolution cases for both the Internal Revenue Service and states across the country.
It is important to carefully evaluate what type of tax professional you should hire depending on your situation. EAs and CPAs might be good for simpler matters, but many are not well versed in tax resolution. A tax attorney is the best fit for negotiating tax settlements, audits, and other complex issues with the IRS.
Unlike other tax relief companies who only have Enrolled Agents, CPAs or tax attorneys, TRP has all three working on the right parts of your case. This results in outstanding results and an affordable cost.