My name is Eva Rosenberg.
I am an Enrolled Agent and the Internet’s TaxMama®.
I come by my credentials honestly, having earned a BA in accounting, an MBA in International Business and having earned the EA the hard way – by passing the exam.
- Where an Enrolled Agent fits in the accounting landscape
The concept of Enrolled agents was created with the passage of the Circular 230 regulations after the Civil War, in 1884 with the so-called Horse Act (to combat fraud in the requests for reimbursements for horses taken during the war)
CPAs were established in law, soon after, on April 17, 1896
according to Flesher, D.L. Previts, G.J. & Flesher, T.K.,Profiling the New Industrial Professionals: The First CPAs of 1896–97 (Business & Economic History. volume 25, 1996
The big difference in the focus and creation of EAs and CPAs is – EAs were created to help people who needed to intercede with the Federal government on their behalf. While CPAs were created to establish uniformity in accounting.
Enrolled agents are regarded by the IRS as the highest level of tax professionals in the country – because all our CPE must be federal income tax related .
Current IRS promotions state the EA is “the highest credential the IRS awards” and an “elite status.” And watch this video with Dave Williams. the founder and former head of the IRS Return Preparer Office (in charge of all testing and CPE). He is very funny.
When you hire an EA, what does an EA bring to the table?
While enrolled agents are not required to have a degree in accounting, many do have at least one degree, sometimes more – and/or have many years of work experience in the accounting or bookkeeping field.
Better yet, because so many EAs come to the profession later in life, they also have a variety of business skills, specialized industry expertise, life skills and licenses – as well as a broad base of contacts within your community.
The backgrounds or prior careers of some of the EAs I have taught or have known?
Engineer, physician, nurse, secretary, PTA mom, truck driver, military, minister, bookkeeping, athlete, law enforcement, national CPA tax manager, mediators, stockbrokers, financial analyst, physical therapist, banking, attorney, notary public, and that just scratches the surface.
Incidentally, EAs are often rather smart and creative people – they simply don’t have the funds or backing to pay for full-blown college degrees. So they use the EA as a springboard to become a CPA or attorney. The person you hire, is apt to be ambitious enough to want to grow with your company or firm – and to become quite a rainmaker.
What an EA can do for your firm.
Your top CPA candidate recruit was probably a star in college. He or she is undoubtedly brilliant and driven. However, they cannot perform a simple task like calling IRS and getting information about a client’s notice or requesting a transcript. Because they do have Power of Attorney authority.
Instead, you can hire a brand new EA, even if they have little or no experience. You can put them on a power of attorney along with you from day one. They can log into the e-services database using their own identity, or call the Practitioner’s Priority Service.
A new, inexperienced EA won’t cost you nearly as much as your star CPA candidate.
But they can handle all IRS correspondence (with your oversight and review, of course); make all calls to get levies released; talk to IRS, state and local tax agencies on behalf of the client, set up installment agreements, or prepare offers in compromise documents – and actually speak to the government agencies about routine matters.
How many of those insidious and annoying IRS or state notices do your clients get that someone like this could take off your hands?
Sure, you probably have them (or your assistant) use your POA to go online to IRS’ e-services in your name and download information for you. (Of course you won’t admit that you do that…) But that’s a pretty dangerous thing to do.
a) It’s not ethical to have someone impersonate you on the IRS’ secure website.
b) The IRS taxpayer database is highly private. Using e-services is a privilege and a mark of great trust. Even IRS agents looking up taxpayer information without valid authorization get into serious trouble. Just imagine what happens if you are caught letting someone else log in as you.
- You can not only lose your access to the online service,
- the IRS Office of Professional Responsibility is apt to disbar you – and so will your State CPA Society or Bar Association.
c) By allowing someone else to impersonate you, you have demonstrated that you are willing to break the law. You have already moved towards losing your staff’s respect.
d) So is there any reason that staff person shouldn’t do the same thing? The information in that database is ripe for identity theft. Why shouldn’t they create other phony POAs under your name, using your information – and make it look like YOU’RE the identity thief.
Encouraging staff to become EAs and how that can help you
Your new hires will not be CPAs for at least two years because of the testing and experience requirements. But if you encourage your staff to sit for the EA exam, they can become more useful to you in your tax department – even before they qualify for their own POA rights as a CPA.
Your juniors and staff members are recent college graduates. They are fairly used to taking exams. It would not be all that hard for them to pass the EA exam, with a little bit of study.
In fact, your clerical staff have been proof-reading your tax returns and financial statements and tax correspondence. They probably know a lot more about taxation than you realize. They are also excellent candidates for the EA Exam.
Having people becone EAs increases their usefulness when it comes to so many of the tedious, day-to-day tasks that don’t require craft and skill – just gruntwork and sitting on hold.
The EA exam used to be administered by IRS once a year. It was a two day affair, consisting of 4 exams. IRS would release the questions and answers a few months after each exam was completed. If you didn’t pass any parts, you had to wait a whole year to try again.
Today, it consists of three exams. You can take each one up to 4 times a year within a 10-month window from May – Feb of the next year. The exams are harder than they used to be. And we no longer get the answers, or even sample questions. But, even if you don’t pass the first time, you can finish all three exams within one testing window.
(If you don’t pass one
of the parts, you have up to 24 months to finish the entire process.)
Incidentally, there IS another way to become an EA – without taking the exam. You can work for IRS for 5 years in certain capacities and get your EA automatically when you leave the IRS.
Removing IRS and State burdens from your shoulders
My assistant worked her way up from proof-reading to preparing returns, to passing the EA Exam – to taking over all my IRS correspondence and routine phone calls. She can fill out and understand most tax-related forms. She is an EA in her own right now.
Lulu deals with tax audit workpapers. She gathers information from IRS and state to help recover missing information for our clients’ multiple, prior-year tax returns when they have been unable to file (we have an older, ill client in that position right now).
In fact, during the 2 year span of the Homebuyers Credit, Lulu managed a small team of EAs who processed over 1,000 homebuyers Credit returns, dealing with all the IRS rejections (due to their own internal administrative problems – and some lack of clarity in the laws and procedures). I set up the framework and did the research and legal-writing – they fought the battles and got millions of dollars released to brand new homeowners around the country.
As a result of her skillful management of that project, I have now turned over most of my clients to her, as the foundation of her own practice. These days, I devote more of my own attention to teaching and writing. Having my clients in Lulu’s hands, I am certain my clients are receiving the proper level of care and attention.
Improve your IRS audit and collections representation in the process
Over the years, I have seen many tax and accounting offices turning referring out work related to IRS audits and complex collections issues. (In fact, many of those referrals have come my way.) Why?
Most accounting and tax professionals simply don’t have the background and training to deal with these areas of practice. Especially people in practice for many years. This is especially true for the sole practitioner or those with small practices.
For many years, in fact, the exact rules of the game were shrouded in mystery and fear. IRS did their best to keep taxpayers and tax professionals off balance.
However, tax pros who sit for the EA Exam MUST learn these areas of the law. They must become experts in Circular 230 (do you know what that is?) and the IRM – (have YOU read the Internal Revenue Manual?).
In fact, I devote 22 hours worth of class time teaching this in Part 3 of TaxMama’s EA Exam Review course – and another 20+ hours in the CPE Link Tax Practice Series .
You cannot pass the EA exam without knowing how to arrange for an installment agreement. You must know how to use a POA properly. You must understand the mechanics of an offer in compromise – and to get an Appeals hearing.
And, at least in my course, you learn how and when to file Tax Court petitions – even without being able to practice before the Tax Court.
Incidentally, even if they don’t actually know the nuances, EAs are in a better position to learn these skills. They already have a strong foundation in collections, and IRS rules of practice. And they are in a position to help you learn more about this, as well.
Having an EA in your office means you can keep this kind of work in-house. How much extra income will that bring in?
Any suggestions you have for “removing IRS & state burdens… and improving the audit & collections representations process” will be greatly appreciated.
Are you talking about fixing the political process?
Or working with your clients within the system?
If you’re talking about the political process? Get involved. Bring problems WITH VIABLE SOLUTIONS to the attention of key personnel at IRS and the Taxpayers Advocate Service and your own tax or accounting society. If they are systemic issues, errors on the website or in publications, IRS can fix the problem. If they are legal issues, both IRS and TAX both propose legislation to Congress. So does NAEA, CSEA, NATP, AICPA, etc. I do this all the time, myself – and have helped fix some things and have made some things run more smoothly. You don’t need a million-dollar team to make sensible changes.
The best way to do remove or reduce IRS and State burdens when it comes to working with your clients is to take an active approach. Call each client and schedule a planning appointment with them at least once a year. Review their circumstances and keep their taxes as low as possible.
Prevent them from facing penalties and interest using withholding and estimated taxes as skillfully as possible.
How to improve the audit and collections process?
That’s pretty easy – first of all, avoid audit in the first place, by audit-proofing your tax returns. I don’t mean that you shouldn’t take advantage of every possible benefit in the Tax Code. What I do mean is – disclose, disclose, disclose. This generally avoids audits, since all the information is already spelled out in the disclosure statements on the tax return.
As a result, you don’t end up with needless assessments.
And as to collections – if you always respond in a timely fashion, most problems can be averted! (The hardest thing is to train your clients to get you the correspondence on time.)
“Thanks for hosting this event. Having recently become an EA, I am in the process of trying to move out of the “retail” tax preparation environment (think ‘Green Box’ and ‘Statue of ——-‘) and into a professional firm setting that will permit expanded exposure to the more complicated worlds of business returns and representation. It’s a tough go…I am a member of NAEA and my state’s professional chapter, realizing that networking there would be useful. What other things could you suggest I try to ‘showcase’ my experience and knowledge to a prosepective CPA/tax firm?”
Boy have I got some ammunition for you to use in your job search today.
You may want to copy out some of the key points I post here today!
Good question Richard.
“Q. HOW MUCH CLERICAL/OFFICE SUPPORT SHOULD AN EA, ENGAGED IN FULL-TIME REPRESENTATION or TAX PREPARATION, HAVE?”
A. I have always had at least ONE part-time person working for me. With one good support staff person, and doing nothing but tax returns (no writing, teaching, etc) I was always able to handle about 250 clients, multiple years (at first), plus their business returns, and a variety of other problems – working about 35-40 hours a week, often on a three-four day schedule.
You DEFINTELY want someone to proof-read all your returns before you file them or release them to clients.