Accountant? Enrolled Agent? CPA? What you need to know!
The terms “accountant,” “Enrolled Agent (EA),” and “Certified Public Accountant (CPA)” are often used interchangeably. But they are not the same. These three professionals are very different in their scope of work, the tasks they perform, their licensing and professional status, and their standing with the Internal Revenue Service. When exploring hiring one of these professionals to do your accounting or taxes it’s important to know what each can do and which to hire.
To understand what differs in these roles, you first need to understand how they are similar. Each of these roles do accounting work. Accounting is basically the recording and reporting of business and financial transactions. Anyone who does that function can call themselves an accountant, even without a degree in accounting. Although, typically, an accountant does have accounting-related education.
Unlike Non-Certified Accountants, Enrolled Agents and Certified Public Accountants enjoy virtually unlimited practice rights before the IRS. That means there are no restrictions to the types of tax issues they can handle and the type of taxpayers they can serve.
Additionally, both these tax professionals may represent tax clients before any type of IRS office. Lastly, EA’s and CPA’s are required to meet specific ethical and continuing education requirements.
So let’s find out more about each role:
Non-Certified Accountants perform tasks such as bookkeeping, maintaining general business accounts, and taking care of simple tax-related matters. A Non-Certified Accountant is classified by the IRS as an “unenrolled preparer,” which means they have no standing with the IRS in the matter of signing tax returns or representing clients during tax audits and other matters before the IRS.
While accountants with the appropriate training and experience can perform a wide range of services, CPA’s and EA’s have additional levels of credibility and expertise, however the requirements to achieve these credentials differ.
An Enrolled Agent is a tax practitioner who is licensed at the federal level by the Internal Revenue Service. In fact, the enrolled agent status is the highest credential the IRS awards. To become an Enrolled Agent, one must pass a three-part series of tests called the Special Enrollment Examination that covers individual and business tax laws and representation issues. The enrolled agent exam focuses mostly on tax preparation matters and very little on accounting practices. Though to successfully prepare taxes, an Enrolled Agent would need to understand accounting practices.
Certified Public Accountant
A CPA has an additional level of credibility and expertise. A CPA is an accountant who has passed certain examinations and met all other statutory and licensing requirements of a state to be certified by that state.
Although the exact criteria can vary by state or jurisdiction, CPA’s generally must complete:
- 150 semester (225 quarter) hours from a college or university that include:
- 24 semester (36 quarter) hours in upper-division accounting specific courses; and
- 24 semester (36 quarter) hours in accounting or business related courses
- Meet experience requirements
- Pass the four-part Uniform Certified Public Accountant Examination
CPA’s not only study tax issues, they also gain expertise in accounting matters such as financial planning and auditing. Typically, a CPA will choose one of these areas to focus on.
What can a CPA do that other accountants or Enrolled Agents cannot?
Public accounting encompasses a wide range of accounting, auditing, tax, and consulting tasks for corporations, small businesses, non-profit organizations, governments, and individuals. Any qualified accountant can do most of these tasks; however, a CPA can do two things that an accountant without a CPA license cannot:
- Prepare audited or reviewed financial statements and file a report with the Securities and Exchange Commission (SEC). All public companies must file audited financial statements with the SEC
- Represent clients in front of the Internal Revenue Service. (However, a non-CPA who is an attorney, enrolled agent, enrolled retirement plan agent, or enrolled actuary can represent clients to the IRS)
The Main Advantages of hiring a CPA
Accountants prepare three main types of financial statements: audited, reviewed, and compiled. Only a CPA can prepare an audited financial statement or a reviewed financial statement, although any accountant can prepare a compiled financial statement. The key thing to know is that most small businesses never require an audited or reviewed financial statement. Typically, only public companies or government entities must produce audited statements.
When individuals or business make the decision between going with a CPA vs. an accountant, this is one of the biggest considerations they take into account — you’ll end up paying more for the extra costs of hiring a CPA when the expertise of an accountant or Enrolled Agent will be plenty!
Which Accounting Professional Do You Need?
Every business needs someone to keep track of their books. Whether you hire us or an employee within your company, you will need a bookkeeper.
You also must have someone to help you review your financial reports and help you make decisions on finances and taxes. No one can tell you that you must get a CPA or Enrolled Agent, but as mentioned above, an accountant who is not a licensed practicing CPA or Enrolled Agent cannot represent you before the IRS. This important distinction is why a CPA or Enrolled Agent is recommended to help you review your books and give you tax advice, as well as prepare and file your business and personal tax returns.
The Accounting Professionals at Plentybooks
When you work with us at Plentybooks, you can trust you have a professional in your court, dedicated to the highest standards of tax expertise and personal service.
Currently, the owner and tax professional at Plentybooks, Andrew Trost, is an Enrolled Agent and is admitted to practice before the IRS. Andrew graduated from Southern Oregon University receiving his Bachelors in Business Administration with a focus in Public Accounting. At Plentybooks our goal is to help businesses and individuals better understand how the decisions they make impact their books and financials. At Plentybooks, we offer bookkeeping, tax advising, tax preparation, and tax resolution for those that need representation before the IRS.