There are about 730,000 professional tax preparers* in the United States, according to the IRS. They range from those who work for the big 4 accounting firms to smaller firms, from the national chains to the self-employed accountants, to even those who 'operate' from their kitchen tables.
In 2011 the IRS initiated regulations on the profession by requiring anyone who prepares tax returns for compensation to take a minimum number of educational hours and to pay an annual registration fee. The goal was to ensure that taxpayers can rely on qualified tax preparers and to sanction those who engage in fraudulent or reckless preparation. This would be no different than when you go to a hairdresser or dentist, knowing that the individual possesses proficiency and knowledge by meeting a certain standard. But legal action was brought on behalf of several preparers and ultimately the IRS lost. The Court's decision involved the definition of 'practice before the IRS', and based their ruling on the fact that the agency was not empowered by Congress to assume this authority over unenrolled tax preparers.
But there already exists a category of tax preparers who have met a higher standard within the profession, having passed an IRS exam in order to be authorized by the IRS to represent clients. By becoming an enrolled agent, these professionals have demonstrated advanced knowledge not only in tax law, but ethics and representation practices as well. Only enrolled agents, along with both certified public accountants and attorneys who are licensed state-by-state, are authorized to 'practice before the IRS', representing taxpayers in issues such as audits, appeals and collections. So while there might be confusing terminology, only enrolled agents are federally licensed, having met a higher standard in the tax profession.
Learn what an EA can do for you, here.
* The law still requires anyone who prepares tax returns for compensation to obtain a PTIN (preparer tax identification number), and record this on your tax return as part of their identification.
What's the answer to the question?
With over 735,000 tax preparers, there are approximately 55,000 enrolled agents...about 7.5 percent. (data as of 2017)
So when you choose your next tax preparer, have an EA!