Capabilities of an Enrolled Agent

A unenrolled tax preparer, if electing to be third-party designee, will be able to call the IRS to check the status of your tax return, whether it has been accepted or rejected, whether the refund has been issued or if there is a delay. And that's about it.

Regardless whether you paid someone to prepare your return, the IRS will only deal with you concerning any tax issues...unless you authorize someone to speak on your behalf by signing a Power of Attorney. While that term sounds disconcerting, it really isn't. It's a form in which you specify which tax years and matters you're permitting someone to act on your behalf. You can revoke it at any time.

So who can be authorized under a Power of Attorney? Not everyone! There are a few categories (immediate family members, the preparer of the tax return, for example), but unless they are what is called 'Circular 230 professionals', they have limited capabilities even with this form and cannot fully represent you before the IRS in all possilbe phases of an audit: the examination, appeals, and collections. Circular 230 are the regulations that govern those professionals who can represent you: enrolled agents, certified public accountants and attorneys.

What are the distinctions (in regard to taxes) between a CPA, an attorney, or an EA?

All too often, taxpayers assume they have to engage a CPA's services if their tax situation becomes a bit more complicated. While the perception is that a CPA is a tax expert, that's not always true. Generally, a CPA has tax law knowledge having obtained the degree, but may concentrate in matters concerning corporations and partnerships, internal auditing, etc., while the term 'accountant' is so general it can refer to anyone dealing with finances, payroll, and the like. Although there are CPAs with tax-centric practices, it depends on the individual. Attorneys practice law, but whether they specialize in tax law, again depends on the individual.

By definition an enrolled agent, having passed the Special Enrollment Exam given by the IRS, has demonstrated a mastery of tax law. EAs are the only tax practitioners who are federally licensed, though these three categories of professionals are authorized to "represent taxpayers before the IRS." So what does that phrase mean?

What an Enrolled Agent can do that a regular tax preparer cannot:

So when it's time to get your taxes prepared, someone who is an EA can offer more to a client and, most importantly, may be someone whom you can trust as a tax expert.