subject: Update On The New Tax Preparer Regulations [print this page] According to the IRS, there are roughly 1.2 million paid tax preparers in the United States. Approximately 46,000 of these individuals are enrolled agents. In addition to preparing returns, the EA designation can allow a practitioner to represent and act on behalf of any taxpayer before any office of the IRS. When practicing before the IRS an enrolled agent has the same privileges as a CPA or Attorney, who are also considered Circular 230 professionals. Unenrolled preparers (unlike enrolled agents, attorneys or CPA's) do not have the full privileges of practice before the IRS. They may only represent taxpayers in a limited capacity for returns that they prepared.
Why have only a select few tax professionals chosen to earn the EA credential? After all, most have no credentials at all and there are almost ten times as many Certified Public Accountants (CPA) as there are enrolled agents. Perhaps it is because enrolled agents were the only tax professionals required by the US government to demonstrate their tax expertise by passing a difficult qualification exam. Most tax preparers, both experienced and inexperienced, have elected not to take the EA exam because they simply were not required to do so. While I am certainly not attempting to diminish the qualifications, neither attorneys nor CPA's are required to demonstrate competence in tax preparation or representation matters before they may stand for taxpayers before the IRS. Perhaps that is because the prerequisite education and bar exams and are viewed as difficult enough to justify admittance.
There are several reasons the enrolled agent EA designation is quickly becoming the title of choice for many of these tax professionals. For one, we are about to enter into a period of regulatory oversight for all paid preparers. In the past, anyone could prepare a return without demonstrating a minimum level of capability. This is changing later this year when all paid preparers will need to register with the IRS and pass a competency exam. The new regulations will not require Circular 230 practitioners (enrolled agents, certified public accountants and tax attorneys) to take any of the new return preparer tests to prove their competency. Everyone else who will prepare returns for a fee is required to take the new exam. These unenrolled preparers have not met the minimum standards set by IRS and will need to take the IRS exam, regardless of any other designations they may have earned.
As you might imagine, many tax professionals will be required register with the IRS, pass the new tax preparer exam, and satisfy annual continuing education requirements. Some of these individuals will likely opt for the enrolled agent exam in order to increase their capabilities. We expect the ranks of the EA to grow substantially as the designation allows a practitioner to do far more than an unenrolled "paid preparer."
Mandatory registration for paid preparers is set to begin later this fall, and we anticipate administration of the new exam as early as the first half of 2011. Since those who hold the EA credentials are exempt, the smart choice for many will be to go for the EA before they are required to register.
There is no enrolled agent education requirement before an individual may take the EA Exam. Even the most seasoned tax professionals can have difficulty on the test without proper study and a good enrolled agent course or study guide. There are several different types of enrolled agent courses available in the market today. Whether you prefer online questions, or a book, there plenty of options available to help you learn fast and pass. Good luck.
