EA vs CPA: Comparing the Requirements, Salaries, and Careers of Enrolled Agents and CPAs

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EA vs CPA: Which is better?

When you’re contemplating whether to earn the Enrolled Agent (EA) designation or the Certified Public Accountant (CPA) certification, you need to know the answer.

Both are good options. The EA and the CPA each have their pros and cons as well as distinct effects on your long-term career.

To help you make the decision, let’s take a look at each of these certification options.

What Is an Enrolled Agent? What Is a CPA?

EAs, or enrolled agents, are tax preparers authorized to represent taxpayers 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 services, and offer tax expertise. Typically, their clients are businesses that need both accounting and tax services.

EA vs CPA Exam and Credential Requirements

The steps to becoming an EA or a CPA are quite similar. As you’ll see, the basic requirements are the same, but the manner in which you fulfill the requirements differ.

Qualify for the Exam

To become an enrolled agent, you must either take the EA exam, also known as the Special Enrollment Exam (SEE), or have previous work experience at the IRS. Passing the exam is much easier once you have several years of tax experience. However, there is no prerequisite for taking the exam. In fact, you can schedule and sit for the exam as soon as you obtain a Personal Tax Identification Number (PTIN), even if you are still in college.

In contrast, sitting for the CPA Exam involves meeting an education requirement. Almost every state board of accountancy (the organizations that determine the CPA requirements) requires 120 credit hours of education to sit for the CPA Exam. As you can see, this requirement is the equivalent of a bachelor’s degree. Most state boards also prefer that degree to be in accounting.

Learn the Exam Content

The EA exam has 3 parts. Most people consider Part 1 and Part 3 to be the easiest, as some experienced tax professionals can pass these parts without much studying. But almost everyone must work hard to pass Part 2. So naturally, it has the reputation of being the hardest.

The CPA Exam has 4 parts, and the exam content is much, much broader. The CPA Exam section equivalent to the EA exam is Regulation (REG). Only around 70% of the REG material relates directly to the EA exam, while the rest covers other topics such as business law.

However, comparing the taxation section of REG to that of the EA exam reveals quite a lot of overlap. In fact, this shared content can help candidates pass both exams in time. If you start with the CPA Exam and struggle with REG, you can temporarily change course by passing EA exam and earning the EA designation. Then, with your improved understanding of tax, you can come back to REG, pass the CPA Exam, and, ultimately, get the CPA license as well.

Pass the Exam

As I said, the EA exam has 3 parts. You can’t take the exam from March-April every year because the exam is closed for updates. Otherwise, you can take the exam parts at any other time during the year and in any order you like. You can take them hours, days, or months apart. In case you fail an EA exam part, you can take each exam part a total of 4 times during the testing window (May 1-February 28). You can pass the EA exam in a timely manner by studying with an EA review course and sticking to a study schedule.

The CPA Exam has a stricter timeline than the EA. The CPA Exam is only available during 4 annual testing windows:

  • January 1-March 10
  • April 1-June 10
  • July 1-September 10
  • October 1-December 10

You can only sit for the CPA Exam during these testing windows. Additionally, you must pass all 4 parts of the CPA Exam within a rolling 18-month period. This time period begins as soon as you pass your first exam section. At that point, you have 18 months to pass the remaining 3 sections. If you don’t pass the remaining sections within this time, you will lose credit for the first section you passed. You must then pass that section and any other unpassed sections within 18 months of the time you passed your second section. With such tight deadlines, relying on a CPA review course and faithfully adhering to a consistent study schedule are even more critical for achieving CPA Exam success.

Fulfill the Remaining Requirements

If your path to the enrolled agent credential runs through the EA exam, you don’t need to meet an experience requirement. You only need to pass the exam. Thankfully, you’ll receive your exam results immediately. And once you’ve passed, you can apply for enrollment by filling out Form 23. The processing of your application can take 60 days (90-120 if you’re a former IRS employee). Additionally, as part of the evaluation of your enrollment application, the IRS will conduct a suitability test. This test will include a review of your personal tax compliance.

To finish the process of becoming a CPA after you’ve passed all 4 CPA Exam sections, you must acquire an additional 30 credit hours to fulfill the 150-hour education requirement. Additionally, you must work in an accounting position for 1-2 years to meet the experience requirement.

All in all, while there may be exceptions to the rule, the CPA license generally has a much higher barrier of entry than the EA credential.

Enrolled Agent vs CPA Salaries and Career Prospects

According to Payscale.com, enrolled agents typically make between $30K-$75K a year. CPAs usually make between $40K-$104K per year. So, starting salaries for a CPA and an EA are comparable, but CPAs benefit from increased earning potential as time goes on. However, enrolled agents have the opportunity to earn extra money during tax season. I have a reader who actually makes more during those few months than he usually earns for the year in retail.

As for the employment situation, enrolled agents usually don’t work for a firm. They actually have their own clients and can, therefore, work at home with flexible hours. On the other hand, many CPAs start off in audit firms, but as they accumulate experience, they can launch their own practices and acquire their own clients.

In the perspective of the IRS, CPAs and EA are on the same level.

The EA vs CPA Value-Add to Clients

Both CPAs and EAs can provide superior services to clients. First, I’ll show you how EAs add value, and then I’ll reveal the ways in which CPAs assist their clients.

The EA Advantage

  1. Enrolled agents are tax specialists.

EAs work on tax only. Therefore, they may have a tax specialization, such as tax preparation or tax resolution. For this reason, a CPA who specializes in tax should consider earning the EA so they can demonstrate their tax expertise.

  1. The EA designation is a federal credential.

Since the IRS empowers enrolled agents with an unlimited right to practice on a federal level, enrolled agents can work with a client who may have filings across all states in the U.S.

  1. Hiring an enrolled agent is more affordable than hiring a tax attorney.

Enrolled agents can often perform the same services as a tax attorney for a much lower price. For example, enrolled agents can represent their clients in civil resolution cases.

  1. Taking the EA exam is faster than taking the CPA Exam.

As you may recall, the EA exam has 1 fewer part (3) than the CPA Exam (4).

Furthermore, the REG CPA Exam section questions don’t go into as much detail about tax as the EA exam questions, but they are harder, in part because the CPA Exam sections contain both multiple-choice questions and task-based simulations. The EA questions are more in-depth but less varied and complicated, so they are easier. Therefore, most candidates only need a few months to pass the EA exam. In comparison, many people need 12-18 months to pass the CPA Exam. The less time you take to get the designation, the sooner you and your clients can enjoy your improved status with the IRS.

The CPA Advantage

  1. CPAs do accounting and sometimes tax as well.

A CPA’s expertise is based in accounting and auditing, but most CPAs provide tax filing services as well. This combination of skills is attractive to small businesses needing both audit and tax services, preferably coming from the same team.

  1. CPAs can take a holistic approach to improved tax planning.

Hiring a CPA makes more sense for businesses because someone who “knows the numbers” can conduct better and more accurate tax planning.

Which Will You Choose?

Enrolled agents are not as well-known as CPAs. However, they are as good (if not better) at handling income tax matters. If you would like to specialize in income tax and desire the flexibility of working at home with your own clients, I encourage that you explore the EA path further. Take the next step toward the EA designation by seeing if the Enrolled Agent exam is harder than the CPA Exam.

 

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