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CPAs, EAs and Tax Attorneys, and the Differences Between Them

When hiring a professional to prepare your expat tax return, it is important to find the most appropriate person for the job at the best price. Enrolled Agents, tax attorneys and CPAs all advertise in the phone book and on the Internet. And of course, all of them claim to be the best in the business. Before deciding who would be the best person to hire to help prepare your tax return you should know the difference between them.

In short, a certified public accountant (CPA) is an expert in accounting. Tax matters are one of many specialties of CPAs. An enrolled agent (EA) is a tax practitioner who is authorized by the federal government. EAs are specifically skilled tax experts who are empowered to represent clients before the IRS and can handle matters concerning collections, appeals and audits. A tax attorney, as the name implies, is a tax law specialist and can represent a client in a court of law. It should not be assumed, though, that a tax attorney deals with the IRS, as this is not always the case.

If you find yourself in a difficult tax situation, and you feel you might be headed to court, the person to hire is a tax attorney. However, for out of court issues, an enrolled agent can do the same job for less money. Enrolled agents can represent you before the IRS, but only an attorney can represent you in court.

You can feel confident hiring an EA to file your expatriate tax return, as long as the particular agent has experience with expat returns. Tax attorneys and CPAs are also capable of filing your return. Their fee, however, will most likely be significantly higher. And an experienced EA will do the job with as much efficiency and skill.

Of course, those are the simplified definitions. When choosing between a CPA and an EA, it may help to know about the requirements involved in their particular professions.

How does one become a CPA?

On the path to becoming a certified public accountant, a CPA must first earn either a BS or a BA (and preferably in finance, accounting, administration or management). Because a CPA can only practice in the state in which he is licensed, he must first pick a state in which to get the license. The exam is fairly similar, regardless of the state. It will consist of four sections and 1000 questions. After passing the exam, aspiring CPAs are required to meet certain practice requirements (interning with a CPA, etc).

The four sections of a CPA examination cover:
  • Auditing and Attestation (AUD). The ins and outs of the auditing process are covered in this section. Also covered are the standards applied to and the application of attestation.
  • Business Environment and Concepts (BEC). This section covers business transactions and related accounting.
  • Financial Accounting and Reporting (FAR). This section deals with the accounting principles for a wide variety of situations (business, non-profit and government).
  • Regulation (REG). Ethics, professional responsibility, federal taxation and business law are covered in this section.
Click here for a specific list of the topics on each part of the CPA exam.

Clearly, the business life of a CPA is about much more than taxes and taxation. They are not usually considered to be tax experts, simply because their span of knowledge is much broader than taxes alone.

What about EAs?

Enrolled Agents are the only tax professionals who get their license to practice directly from IRS and the United States Treasury.

There are two paths to becoming an EA. After working for the IRS for five years, an agent can become an EA without passing an examination. Without working for the IRS, one must pass a thorough background check and a three part exam. To become an EA, an agent does not have to have any prior knowledge of tax form preparation. In fact, an EA may choose to never prepare a tax return. Enrolled agents specialize in their knowledge of the tax code and tax matters. An EA must know all of the ins and outs of income tax, gift tax, inheritance tax, estate tax, and payroll tax. The continuing professional education required for an EA is seventy-two hours every three years. Unlike a CPA whose continuing education will cover a wide range of accounting and tax matters, an EAs education will focus solely on taxation and tax ethics.

The examination required for an EA are:

  • Part 1 - Individual. 100 questions exclusively on the tax code for individuals.
  • Part 2 - Business. 100 questions exclusively on the tax code for business entities.
  • Part 3 - Representation, Practice and Procedures. 100 questions primarily on Circular 230, the Treasury Department guide for practicing before the IRS.
For more information on Enrolled Agents, their background and requirements, please view the We are an Enrolled Agent page on our web site. For information about how we can represent you with tax issues, please see our Representation page.

When Enrolled Agents take their required continuing professional education (CPE), which consists of 72 hours every three years (more if they are NAEA members), it must be 100% in taxation and the ethics of taxation.

In other words, Enrolled Agents are the nation's only solely dedicated tax professionals.

Side-by-side, it is obvious that an EA has more expertise in tax matters than a CPA. Yet, for whatever reason, most professionals still approach CPAs for tax advice. This may simply be that many people are not aware of the existence of EAs. They do exist, however, and they are the only federally authorized tax professionals. Also, it's worth mentioning that the IRS itself recognizes EAs, not CPAs as tax experts.

Be wise. Seek tax advice from a tax professional and accounting help from an accountant.