Are you contemplating whether to go for EA vs CPA? What are the pros and cons, and the implication to your long term career? Let’s take a look.
What is an Enrolled Agent, or a CPA?
EAs, or Enrolled Agents, are authorized to represent tax payers before the IRS. Their clients are individuals, partnerships, corporations, estates, trusts and any entities with tax-reporting requirements.
CPAs, or Certified Public Accountants, are licensed individuals with the statutory privilege to sign an audit report. They can prepare financial accounts, provide audit service, and / or tax expertise to clients. Their clients are normally business that needs both accounting and tax service.
EA vs CPA in terms of the Difficulty in Getting the Qualification
In order to become an Enrolled Agent, one should take the SEE exam or has previous work experience at the IRS. There isn’t really a prerequisite in taking the SEE exam.
In contrast, there are strict educational and experience requirements for the CPA. First, one should have an accounting degree and 150 credit hour of general education to get qualified for the CPA exam. Once you pass this exam, you’ll need to work for 1-2 years under direct supervision of an active US CPA. There are a few exception to this general rule but in any case it has a much higher barrier of entry than that for Enrolled Agents.
EA vs CPA in terms of Salary and Career Prospect
According to Payscale.com, enrolled agents typically make between $30K to $75K a year, while CPAs make between $40K to $104K per year.
Enrolled Agents usually don’t work for a firm. They have their own clients and therefore can work at home, and on flexible working hours. Many CPAs work in audit firms but as they accumulate the experience, they can launch their own CPA firm and have their own clients.
Enrolled Agents also have the flexibility to earn extra money during tax season. I have a reader who actually earned more than he usually does in retail for those few months.
EA vs CPA in the Eyes of IRS
CPA and EA are in the same level as an EA in terms of the way the IRS sees you.
EA vs CPA in terms of Value-Add to Clients
How Enrolled Agents Can Provide Better Service
1. EAs are Tax Specialists
EAs work on tax only, and therefore they may have specialization within tax, for example, tax preparation or tax resolution.
2. EA Designation is a Federal License
Since EAs are licensed by IRS with unlimited right to practice on a federal level, they can work with the same client with filings across all states in the US.
3. EAs can a More Affordable Option to Tax Attorney
Enrolled Agents can often do perform a tax attorney’s job with a more affordable price tag. For example, they can represent their clients on a civil resolution cases.
4. Taking the EA exam is a Faster Track than the CPA exam
The EA exam has 3 parts vs 4 parts in the CPA exam.
CPA REG question are harder but ask less in depth. EA questions are more in depth but easier. Therefore, most candidates only need a few months to pass the EA, vs 12-18 months for the CPA exam.
How CPA may have More Value-Add
1. CPA Takes Care of Accounting, and Sometimes Tax as well
CPAs’ expertise is more on accounting and auditing, but most provide tax filing services as well. This combination is attractive to small businesses in which they need both audit and tax services, preferably by the same team.
2. The Holistic Approach Leads to Better Tax Planning
For businesses, it does make more sense to hire a CPA, because “knowing the numbers” does help in making better and more accurate tax planning.
EAs are not as well-known as CPAs, but are as good (if not better) in income tax matters. If this is what you would like to specialize in, and that you like the flexibility of working at home and having your own clients, I encourage that you explore this path further.