Selecting the appropriate tax expert can greatly impact your sense of security. However, with numerous choices available—such as tax accountants, tax lawyers, certified public accountants (CPAs), enrolled agents (EAs), and others—it may not always be obvious which one is most suitable for your specific needs.
Each kind of tax professional has unique credentials, areas of expertise, and legal power regarding submitting tax documents, providing financial guidance, or acting on your behalf with the IRS.
Types of tax preparers
Here’s a brief overview of the primary categories of tax experts:
| Types of tax preparers | Overview of their activities |
|---|---|
| Tax preparer | Tax professionals specialize in completing and submitting tax forms. They do not need a certification and are not mandated to have official tax training, although they might receive instruction from a tax preparation company (such as TurboTax or H&R Block).Every individual compensated for preparing a tax return is required to possess a Preparer Tax Identification Number (PTIN) provided by the Internal Revenue Service (IRS).Additionally, a few states mandate that all tax professionals must be registered or licensed. |
| Tax accountant | Accountants handle tax filings and advise clients on methods to reduce their tax liability; they assist companies in managing financial records, maintaining organized books, and keeping up with changing tax laws, along with various other responsibilities. Continue reading to discover more about tax accountants. |
| Certified public accountant (CPA) | CPAs perform all the tasks that accountants do, along with additional responsibilities. For instance, they approve audit reports, provide business and financial guidance, and may act on behalf of clients in front of the IRS. Skip ahead to discover more about CPAs, including the qualifications needed to obtain this designation. |
| Enrolled agent (EA) | Enrolled agents specialize in tax matters for both individuals and companies. Unlike Certified Public Accountants (CPAs), enrolled agents do not conduct audits of financial statements, but they can, similar to CPAs, act on behalf of clients before the IRS, including handling tax audits and payment-related concerns. Skip ahead to discover more about EAs and learn about the process they follow to obtain their certification. |
| Tax attorney | Some legal professionals focus on tax law. They would have graduated from law school and might hold an LLM, which is a postgraduate degree specializing in taxation. Similar to CPAs and EAs, tax attorneys are authorized to represent their clients in front of the IRS. Here’s more onWhat tax lawyers do and how to locate one. |
What does a tax accountant do?
A financial expert known as an accountant assists both individuals and companies in handling their tax responsibilities. Their role extends well beyond simply completing paperwork — they ensure that your tax returns are correct and submitted promptly, identify methods to legally minimize your tax liability, and assist you in adhering to tax regulations.
Tax professionals manage everything ranging from income tax submissions to payroll andsales taxesThey also provide guidance on tax reduction methods, arrange financial documents for audits, and keep updated with changing tax laws.
Tax professionals usually possess a minimum of a bachelor’s degree in accounting, finance, or a similar area. Several also hold additional qualifications such as CPA or EA designations, which enhance their level of knowledge.
What is a CPA?
A certified public accountant is a qualified financial expert who fulfills education, experience, and examination criteria set by individual states. It is among the most well-known and esteemed titles in the finance industry.
To obtain the CPA designation, an individual must accumulate 150 college credit hours (30 credits beyond the standard bachelor’s degree). CPAs are also required to pass the Uniform CPA Examination and gain one to two years of supervised work experience. Following this, they must participate in continuous education to remain updated on tax regulations and accounting principles.
CPAs perform a variety of tasks beyond just preparing tax returns — they review financial records, provide guidance on business and financial matters, and act as representatives for clients during interactions with the IRS. Only certified CPAs are authorized to carry out specific functions, such as signing audit documents.
All CPAs are accountants, but not every accountant holds a CPA certification. The CPA title signifies a greater level of expertise, accountability, and legal power.
What is an EA?
An enrolled agent, also known as an EA, is a tax expert licensed at the federal level by the IRS. They have the authority to act on behalf of individuals and companies in various tax-related issues, such as audits, payment collections, and disputes.
To qualify as an EA, people need to either pass a detailed three-part exam that covers all areas of tax law or meet the requirements based on previous experience with the IRS. In contrast to CPAs, who typically work in various fields of accounting, EAs concentrate exclusively on tax matters.
Earned Income Advisors have the authority to represent any taxpayer before the Internal Revenue Service, and since they are federally licensed, they are permitted to operate in all 50 states. In order to keep their credentials, they are required to finish ongoing education and adhere to rigorous ethical guidelines.
“Enrolled agents are required to complete ongoing education each year and must revalidate their licenses every three years,” states Tina Collins, an enrolled agent and tax principal at PYA, an accounting and consulting company.
If you require professional assistance with tax filing, planning, or matters involving the IRS, an EA is a reliable expert with extensive knowledge of tax regulations.
CPA versus EA: How to Make a Decision
It’s important to mention that you are not obligated to use an EA, CPA, or tax accountant for preparing your taxes. You have the option to employ a lawyer who focuses on tax preparation, or a tax preparer who holds an IRS Preparer Tax Identification Number (PTIN). Alternatively, you can usetax softwareor perhaps handle your taxes on your own.
However, many individuals opt to hire a professional for reassurance and to prevent the stress that comes with handling it on their own. One benefit of working with an Enrolled Agent (EA), Certified Public Accountant (CPA), or tax attorney is that they are legally permitted to represent you if problems arise with the Internal Revenue Service (IRS)—a capability that most unlicensed preparers and software programs lack, according to Heather Liston, an EA, CFP®, and principal at Clarity Financial, a financial advisory firm.
The key distinction between an EA and a CPA is that “an enrolled agent is a tax expert. Our certification comes from the IRS, and it focuses entirely on taxes,” Liston explains.
Others concurred: EAs obtain their certification “by successfully completing a demanding, tax-oriented examination and fulfilling ongoing tax-specific educational requirements,” according to Jeremy Wells, an EA, CPA, and tax director at Steadfast Bookkeeping.
CPAs are licensed by each state, requiring education, a comprehensive accounting exam, and professional experience,” he states. “Although CPAs frequently work in tax matters, their license is primarily intended for audit and assurance services, with tax being just one aspect of their training.
If you’re choosing between an EA or CPA, consider what kind of assistance you require:
- EAs concentrate solely on tax matters — this makes them an excellent option if your requirements are tax-related or if you need someone with deep expertise in handling the IRS.
- CPAs receive comprehensive training in accounting, finance, and auditing. Although some CPAs focus on tax matters, many provide extra services such as financial planning, business advice, and audit assistance. This makes them suitable if your financial situation is more complicated, or if you need help with more than just tax preparation.
If a taxpayer requires verification of financial statements or has tax preparation needs, they are likely to require the skills of a CPA,” Collins states. “Since an enrolled agent focuses exclusively on tax matters, an EA should be capable of handling even the most complicated tax returns.
If you’re thinking about hiring a CPA to handle your taxes, “you should confirm that this is their area of specialization,” Collins states.
How tax professionals set their fees
Certified Public Accountants, Enrolled Agents, and other tax experts typically employ three primary billing models:
- Fixed per-service fees: Typical in standard tax preparation.
- Hourly fees: For advisory purposes, preparation, or particular inquiries.
- Monthly, quarterly, or annual subscription charges:For continuous, 24/7 services and thorough assistance.
Elements that influence the cost are the complexity of your taxes — such as the kind and quantity of income streams, itemized deductions and tax credits, owning a home, digital assets like cryptocurrency, and more — the kind of service you require, your location, and the professional’s degree of experience.
Typically, the more expert or specialized the advisor, the higher the charges. Usually, simple tax preparation is cheaper than continuous planning or legal services, and companies tend to spend more than individual clients.
Wells states that it’s crucial for taxpayers to not only inquire ‘how much’ but also ‘what are they receiving’ when considering the cost of tax services.
And don’t think that tax professionals with a specific type of certification will always charge more than those with different qualifications. “It’s a misconception that CPAs consistently cost more than EAs. The price is more influenced by the services and relationship you seek rather than the credentials,” Wells explains.
Both Certified Public Accountants and Enrolled Agents can be excellent tax experts,” he states. “The key is whether they focus on your specific requirements and can assist you with assurance.
Bottom line
Engaging a tax expert can reduce your anxiety and possibly save you money—particularly if your circumstances are complicated or you need professional assistance with the IRS.
Certified Public Accountants provide extensive knowledge in accounting and business services, whereas enrolled agents specialize solely in tax matters and representation before the IRS. Tax accountants manage various filing and planning tasks but might lack higher-level certifications. Think about the kind of assistance you require, the complexity of your financial situation, and your budget before choosing the right professional for your needs.
