EA vs CPA: What’s the Difference?
Whether it comes to business or individual accounting and tax planning, sometimes finding the right type of help can become another problem altogether. If you’re looking for a licensed tax professional to help guide you, a clear understanding of the most important tax accreditations and the differences between them will really save you time.
You may be somewhat familiar with both enrolled agents (EA) and certified public accountants (CPA), but knowing which one to choose when you need some help can be a challenge. While both can provide high-quality services, there are key differences to be aware of.
Knowing which one to go with will depend on your own personal needs. This article outlines the differences between these two tax pros.
What is an Enrolled Agent (EA)?
An enrolled agent (EA) is a tax professional licensed by the IRS and is the highest credential the IRS awards. This privilege allows them to represent taxpayers in matters relating to the Internal Revenue Service (IRS), such as tax collections, audits, or appeals.
As federal tax agents, they have a wide scope of expertise across many areas of taxation.
Requirements for Enrolled Agents
In order to become a qualified EA, applicants must pass what is called the Special Enrollment Exam, or SEE. This is an extensive three-part exam, with sections on 1) individuals, 2) businesses, and 3) representation, practices, and procedures. The three exams can be taken in any order, but a candidate must pass all three within a two-year window.
It is also possible for former IRS employees to be given an exemption from the SEE if they have acquired sufficient technical knowledge during their employment.
In addition to passing the SEE, qualified EAs also have ongoing education requirements of at least 72 hours of training every three years. An EA also must meet ethical standards set by the US Department of Treasury. This helps ensure the highest standards of practice and ethics are maintained.
After a candidate has passed the qualifying exam, and a final suitability and background check, the federal government then recognizes them as EA tax professionals. An EA is the highest credential awarded by the IRS for tax professionals. As a result, enrolled agents are considered experts on practically all taxation topics.
What Does an EA Do?
According to the National Association of Enrolled Agents (NAEA), EAs are licensed to advise, represent and prepare tax returns for individuals, partnerships, corporations, estates, trusts, and any other entity with tax-reporting requirements. The profession is long established, having first been created in 1884 following fraudulent Civil War-era tax claims.
Enrolled Agents are generally free to provide these tax services to any tax-paying individuals or businesses they wish to represent. They are not IRS employees. Instead, they are licensed by the IRS, and they play an important role in representing taxpayers before the IRS.
EAs are also qualified to provide professional tax advice, tax return filing, and management of a whole host of taxes including income, payroll, estate, retirement taxes, and more.
What is a Certified Public Accountant (CPA)?
A Certified Public Accountant (CPA) is a licensed accounting professional. CPA licenses are provided by state accountancy boards, and CPAs tend to have a more flexible and expansive range of functions compared to EAs.
For example, in addition to dealing with tax issues, CPAs can also be specifically licensed as auditors, and they often work as business advisors, chief executive officers (CFO), tax consultants, and more. In general, CPAs tend to work for public accounting firms, but they also work independently, for large corporations, and in other settings.
The flexibility of this license means that CPAs can perform multiple important roles when they're employed by a business, from accounting, auditing, financial planning, and tax consultation. They can also provide these services to individual or business clients.
Requirements for CPAs
The requirements for CPA licensing are demanding, and the exact rules vary from state to state. In most cases, obtaining this designation, first of all, requires a bachelor’s degree in either accounting, finance, or business administration. Generally, applicants have to have completed at least 150 credit hours of coursework as part of their education.
This means that they must complete 30 additional credits after earning their bachelor's degree, and in most cases, that involves earning a master's degree in accounting. They will also need to have at least one to two years of work experience under the supervision of a certified public accountant (CPA).
With those educational requirements met, a candidate can then move on to take the Uniform CPA Exam. Although the basic educational requirements do vary between states, this exam is the same in all states across the United States,
The Uniform CPA Exam is a four-part exam, with each part taken individually and in any order. All four sections of the exam must be passed within an 18-month period in order to earn a CPA license.
Like EAs, CPAs are also subject to ongoing educational requirements, as well as a code of ethics to ensure professional standards.
What Does a CPA Do?
CPAs tend to do most of their work for large and small public accounting firms. They may work as auditors, financial planners, corporate and executive accountants, and/or tax consultants. As mentioned above, because of the flexibility of the CPA designation, these professionals can be involved in many different types of financial work.
CPAs can also provide money management and financial planning services to clients. Whether you’re looking to establish a financial route, open your own business, or build savings for a new home, CPAs are a fantastic option when you need a broad scope of financial expertise.
While many accountants will take the steps to earn their CPA designation, it’s important to note that not every accountant is a CPA. Someone may earn an accounting degree, work in the accounting industry, and refer to themselves as an accountant, but that does not mean they have earned the CPA credential.
EA vs CPA — Similarities and Differences
In order to better understand both EAs and CPAs, it can be helpful to have a clear outline of the differences and similarities between the two. Here's a breakdown:
Similarities between EA vs CPA
EAs and CPAs do have a lot in common. Primarily, both EAs and CPAs must pass a test to demonstrate their understanding of the industry, and they must complete continuing education to stay abreast of changes in the industry. They are also both subject to professional ethical standards.
When it comes to the type of services offered, both EAs and CPAs are tax professionals capable of assisting with tax preparation, tax appeals, and dealing with federal and state tax agencies. Additionally, both of these designations can work with individuals and businesses, although it is more common for CPAs to work primarily with businesses.
Differences Between EAs and CPAs
The primary difference between EAs and CPAs is their scope of work. While EAs primarily focus on tax-related issues, CPAs can deal with a host of financial subjects including taxation.
This means that the CPA is a more broad professional title compared to an EA. A CPA, for example, could work as an auditor, or provide financial management services to businesses and individuals. They might also manage accounts for small or large businesses. These are all things that an EA generally doesn't do.
CPAs are also state-licensed, while an EA is a federal designation licensed directly by the IRS.
How to Choose Between an EA or a CPA
When considering whether you need an EA or a CPA, you can at least be assured that both are highly knowledgeable. Both can provide individuals or businesses with the guidance needed to solve most tax issues. Beyond that, however, knowing which one to choose depends primarily on your unique circumstances.
For example, enrolled agents can help individuals navigate an IRS audit or collection problem. EAs can also provide bookkeeping services for businesses needing help in preparing tax returns. A CPA can also handle these issues.
However, if you need an independent audit of your business's accounting records, then you will need to hire a CPA. Similarly, if you're looking for business or individual financial planning, a CPA tends to be a better choice than an EA.
Above all, it’s important to remember that while both professionals can provide a host of taxation services, CPAs generally offer a much wider scope of financial services. CPAs also tend to be in higher demand than EAs, but that's probably only because CPA is a better-known license than EA.
CPA vs EA FAQ
What is an EA vs CPA?
An enrolled agent (EA) is a federally-licensed taxation expert. A certified public accountant (CPA) is a state-licensed professional capable of providing a range of taxation and financial management services.
What can a CPA do that an EA can’t?
While an enrolled agent is a highly knowledgeable tax professional, they are not licensed to provide services outside the realm of taxation. A CPA can provide auditing, financial planning, and many other services in addition to helping with tax issues.
Is an EA better than a CPA?
An EA may be more helpful than a CPA in regard to very specific taxation problems, however in general it is hard to compare the two. A CPA has a much wider scope of professional financial services compared to an EA. The most important point is to find a tax professional experienced with your specific concern.
Find a Tax Pro Today
While understanding the differences between a CPA vs an enrolled agent is important, understanding your individual circumstances is also vital. If you can get clear about the nature and extent of your own needs, you’ll be much better placed to make the right decision for you or your business.
In a lot of cases, an EA or a CPA can both provide the services that you need and when choosing between these two professionals, you should look for someone who has experience with your specific tax problem regardless of whether they're an EA or a CPA.
If you’re not sure where to start, TaxCure can help you find the perfect tax professional to fit your needs, based on the specific problem you’re having. We can also help you narrow down your search to filter for EAs, CPAs, or even tax attorneys if desired. The key to finding the best professional for your needs is to find a professional that is local and has experience with your unique tax problem. This can be an EA, CPA or Attorney. TaxCure helps you do just that, so start a search today to find the best professional to help you.