What is the difference between an EA and a CPA?

Key Takeaways

• EAs are recognized as tax specialists by the US government. 
• CPAs are licensed professionals who can choose to specialize in a variety of different areas, not just tax. 
• EAs and CPAs both need to pass exams to earn their designation. However, CPAs must meet specific educational requirements to become licensed. 
• The professional you choose to work with will depend on a variety of factors. You should choose someone you trust who can help you with your particular needs.

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Enrolled Agent (EA)

An enrolled agent, often shortened to EA, is someone that is recognized by the United States government as a tax specialist. EAs have a broad range of knowledge that spans several types of taxation including income, estate, gift, retirement, and more. In addition to providing tax preparation and planning services, EAs have federal authority to represent taxpayers before the Internal Revenue Service (IRS). 

Certified Public Accountant (CPA)

A Certified Public Accountant, or CPA, is a licensed professional who will generally choose to specialize in a specific area of accounting such as tax or auditing. CPAs may be involved with preparing and filing tax returns, financial consulting, conducting audits, and creating financial reports. CPAs also have the right to represent taxpayers before the IRS. 

Becoming an EA

The first step to becoming an EA is obtaining a Preparer Tax Identification Number (PTIN). This number is issued by the IRS to paid tax return preparers and involves a straightforward online application. Next, a candidate must successfully take and pass all three sections of the Special Enrollment Exam (SEE) which is administered by the IRS. The sections consist of: individuals, businesses, and representation, practice, and procedures. Candidates have three years from the date they pass the first section to pass the other two sections. Finally, candidates need to pass a suitability check which includes a review of tax return transcripts. Candidates who are not current on their tax filings and payments may be denied.  

There are no specific degree or experience requirements to become an EA, so people from all different backgrounds can obtain this designation. However, some EAs may choose to get a degree or certificate in accounting to further enhance their skills. In order to stay current with ever changing tax law, EAs need to accumulate 72 hours of continuing education every three years. The IRS requires a minimum of 16 hours per year, and all continuing education providers must be IRS approved. 

Becoming a CPA

In contrast, the journey to becoming a CPA typically starts with a four-year bachelor’s degree. Although the degree does not have to be in accounting, a certain number of credit hours from accounting and business courses are required. CPA candidates need to have taken at least 150 credit hours to become licensed by their state’s board, so most students will add on an additional year of study at either the undergraduate or postgraduate level. Some states do allow candidates to start sitting for the CPA exam before they have reached the 150-hour mark.

The CPA exam is made up of four parts, each covering a different area of accounting. The parts are Auditing and Attestation, Business Environment and Concepts, Financial Accounting and Reporting, and Regulation. Many states also require that candidates pass an ethics exam. These exams are four hours each. Studying for and passing the CPA exam is a rigorous process that takes several months, if not years, to get through. All four parts of the exam must be passed within an 18-month period, or a candidate will need to start the entire process all over again. The CPA exam is one of the most difficult professional exams in the entire United States. 

CPAs are licensed to work in all 50 states once they pass the necessary exams, no matter which state issued their license. Each state has its own specific rules when it comes to continuing education. However, many states set the requirement at 40 hours per year or 80 hours every two years.

Should I work with an EA or a CPA? 

The answer to this question ultimately boils down to your own preferences and the type of help that you need. An EA might be the better choice if you are specifically looking for help with tax preparation or planning. They are also adept at providing assistance with IRS audits or resolving collection issues. 

On the other hand, a CPA who specializes in taxes and accounting can also provide tax preparation, planning, and representation. CPAs may have more expertise when it comes to identifying and taking advantage of tax credits and deductions for cutting down your tax liability. A CPA may also be a better choice if you want assistance with managing your finances. 

There are several considerations that can help you decide which professional is the right one for you:

• The complexity of your tax situation. If your tax situation is relatively simple, an EA may be the right fit for you. For more involved situations, you may want to enlist the help of a CPA. 
• The scope of your needs. While EAs and CPAs often provide similar services, it is important to find a professional who can meet all of your needs. 
• Experience. Make sure the professional you ultimately work with has experience with your situation. For example, if you need help with cryptocurrency taxes you would want to look for a professional experienced with cryptocurrency. 
• Your budget. The fees can vary between EAs and CPAs.
• Your peace of mind. Taxes can be stressful, so you should work with someone you trust and who will be responsive to you. 

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