A do-it-yourself tax software ad says “it doesn’t take a genius to do your taxes.” That is quite correct. It doesn’t take a genius to do your taxes.
It also doesn’t take a genius to do the wiring in your house nor does it take a genius to install a toilet. It doesn’t take a genius to make a soufflé; and it does not take a genius to change the brakes on your car.
All of these things you can certainly do yourself. If you figure them out without training or experience, you may luck out and not get electrocuted, or flood your house, or serve an embarrassing dessert to your guests, or hit something because your brakes fail.
Yes, you can certainly do your own taxes, but you don’t know what you don’t know. The IRS knows this about do-it-yourselfers, and gives those tax returns more scrutiny.
You don’t need me to do your taxes and you also don’t need insurance on your house. But, once your house is in flames and your tax return under scrutiny, you’re going to wish you had spent the money.
Hire an Enrolled Agent. Maybe a genius, maybe not, but we are highly educated and experienced in the field of income taxes….and these days, it is more important than ever to avoid dealing with the IRS.
– Julie Dailey, EA (Enrolled Agent)
From National Association of Enrolled Agents (NAEA):
How Can an Enrolled Agent Help Me?
Enrolled agents (EAs) are America’s tax experts. They are federally-licensed tax practitioners who both specialize in tax preparation and have unlimited rights to represent taxpayers before the Internal Revenue Service. If you get a letter from the IRS, or worse, are audited or are the target of a collection action, your EA can speak directly to the IRS on your behalf. The enrolled agent license is the highest credential the IRS issues.
To become an EA, a tax professional must pass a stringent and comprehensive three-part examination covering individual tax returns, business tax returns, and representation, practice and procedure. All candidates are subjected to a rigorous background check conducted by the IRS. To keep their licenses, EAs must complete annual continuing education reported to the IRS, which keeps them on top of the most current tax laws. Unlike attorneys and CPAs, who may or may not choose to specialize in taxes, all enrolled agents specialize in taxation. That’s why they’re the tax professional of choice!
From Wikipedia, the free encyclopedia:
An enrolled agent (or EA) is a federally authorized tax practitioner empowered by the U.S. Department of the Treasury to represent taxpayers before the Internal Revenue Service (IRS). Enrolled agent status is the highest credential awarded by the IRS. The EA credential is recognized across all 50 U.S. states. Attorneys and certified public accountants (CPAs) are licensed on a state by state basis, and are also empowered by the Department of the Treasury to represent taxpayers before the IRS. According to the National Association of Enrolled Agents, there are approximately 48,000 practicing EAs in the United States.
The position of enrolled agent was created as a reaction to fraudulent war loss claims in the wake of the American Civil War with roots tracing back to the Enabling Act of 1884, or General Deficiency Appropriation Bill (H.R. 2735), also known as the “Horse Act of 1884,” which was signed into law by President Chester A. Arthur on July 7, 1884. After the Civil War, many citizens faced difficulties in settling claims with the government for property confiscated for use in the war effort. As a result, Congress endowed enrolled agents with the power of advocacy to prepare claims against the government. From 1884 through the early 20th century, this statute remained largely unchanged.
When the Revenue Act of 1913 was passed, signed into law by President Woodrow Wilson on October 3, 1913, the scope of the enrolled agent was expanded to include claims for monetary relief for citizens whose taxes had become inequitable. As income, estate, gift and other sources of tax collections became more complex, the role of the enrolled agent increased to include the preparation of the many tax forms that were required. As a result of this complexity, audits became more prevalent and the enrolled agent role evolved into taxpayer representation, promulgating a series of statutes which were combined into a single Treasury Department Circular in February 19, 1921, known as Circular 230, to address “the laws and regulations governing the recognition of agents, attorneys, and other persons representing claimants before the Treasury Department and offices thereof.”
Unlike enrolled agents of today, the first enrolled agents were appointed with little or no qualifications other than a minimal background in bookkeeping.
Becoming an enrolled agent
To become an enrolled agent, an applicant must obtain a PTIN and achieve passing scores on all three parts of the Special Enrollment Examination, which covers many aspects of the Internal Revenue Code, or must have worked at the IRS for five consecutive years in a position which regularly engaged in applying and interpreting the provisions of the Internal Revenue Code and the regulations relating to income, estate, gift, employment, or excise taxes. A background check, including a review of the applicant’s personal and business tax compliance, is conducted after an applicant files Form 23, Application for Enrollment to Practice Before the Internal Revenue Service, within one year of completing all three parts of the examination.
Maintaining enrolled agent status
In order to qualify for renewal as an enrolled agent, an individual must complete 72 hours of continuing professional education (CPE) every three years, including two hours of ethics or professional conduct in each of the three years. To prevent overloading of CPEs in any year of an enrollment cycle, the IRS requires a minimum of 16 hours of CPE every year.
Renewal after initial enrollment cycle
Individuals admitted to practice at any time during an enrollment cycle, “the three successive enrollment years preceding the effective date of renewal,”must complete two hours of continuing professional education for each month of enrollment, including two hours of ethics or professional conduct in each year.
Practice before the IRS: Enrolled agents and other practitioners
The right to practice before the Internal Revenue Service is regulated by Federal statute, and persons authorized to practice are known as “Federally Authorized Tax Practitioners,”or “FATPs”. The FATP status is granted to attorneys, certified public accountants, and enrolled agents, each having unlimited representation rights before the Internal Revenue Service. These practitioners may represent their clients on any matters including audits, collection actions, payment issues, tax refund matters, and appeals. FATP status is also granted with limited representation rights to enrolled actuaries, enrolled retirement plan agents, and registered tax return preparers.
Enrolled agents, like other FATPs, are subject to a set of procedures and regulations described in Treasury Department Circular No. 230, Regulations Governing the Practice of Attorneys, Certified Public Accountants, Enrolled Agents, Enrolled Actuaries, and Appraisers before the Internal Revenue Service (or Circular 230).
When practicing before the Internal Revenue Service, enrolled agents may not use the term “certified” in describing their professional designation. An enrolled agent admitted to practice before the Internal Revenue Service may not state or imply that an employer/employee relationship exists between the enrolled agent and the Internal Revenue Service.
Practice in federal courts
Enrolled agent status does not automatically allow the enrollee to practice before the United States Tax Court. That practice is limited to members of the Bar of the Court. The Internal Revenue Code states, “No qualified person shall be denied admission to practice before the Tax Court because of his failure to be a member of any profession or calling.” Bar membership for non-attorneys requires that the applicant pass a Tax Court examination. Attorneys are admitted to the Bar of the Tax Court without having to take the examination.