In this article, we’ll go over what exactly an enrolled agent is, what they can do for you, and why you should hire one to help file your taxes.
What is an enrolled agent?
An enrolled agent is a tax advisor who is certified to represent you before the Internal Revenue Service—when filing a tax return, dealing with an audit, resolving payment and collection issues, or appealing a fine (for example).
Enrolled agents get certified in two different ways:
- They can take and pass the Special Enrollment Examination (SEE), which covers all aspects of individual and business tax law, as well as issues around tax representation, practices and procedures. Enrolled agents must also complete 72 hours of continuing education courses every three years to maintain their enrolled agent status.
- If they worked at the IRS for five or more years, they might be able to obtain enrolled agent status without taking the SEE. Many enrolled agents are former IRS agents, so this option seems to be pretty popular. However current IRS employees cannot be certified as enrolled agents.
All enrolled agents have also successfully passed a background check. It’s safe to say that when you approach an enrolled agent, you’re speaking with someone who knows tax law inside and out.
What exactly can enrolled agents do?
Enrolled agents have something called unlimited practice rights (also sometimes called unlimited representation rights). This means that they can help anyone—individuals, businesses, and any other entity—with any aspect of their taxes.
Enrolled agents can, among other things:
- Help you with tax planning
- Give you tax advice and help you navigate complicated tax rules
- Prepare, sign, and file your tax return
- Represent you before the IRS when dealing with audit, payment, or collection issues
- Assist you with any other tax matters
How enrolled agents can help with tax debt resolution and tax law navigation
Enrolled agents play a crucial role in helping taxpayers resolve tax debts and navigate complex tax laws. When it comes to tax debt resolution, enrolled agents can act as intermediaries between taxpayers and the IRS, using their expertise to negotiate payment plans, offer in compromise agreements, or other debt relief options. They can assess a taxpayer's financial situation, determine the most appropriate course of action, and guide them through the often complex process of settling tax debts.
For instance, an enrolled agent might help a taxpayer set up an installment agreement with the IRS, allowing them to pay off their tax debt over time in manageable payments. Alternatively, they could assist in preparing and submitting an offer in compromise, which is a proposal to settle tax debt for less than the full amount owed, based on the taxpayer's ability to pay. Enrolled agents can also help taxpayers understand their rights and options when facing tax liens or levies, and can work to have these removed or released when appropriate.
In terms of navigating tax laws, enrolled agents are invaluable resources. They stay up-to-date with the ever-changing tax code and can help taxpayers understand how new laws and regulations affect their specific situation. This might involve advising on tax-efficient strategies for businesses, explaining the tax implications of major life events like marriage or retirement, or helping taxpayers take advantage of deductions and credits they might otherwise miss. Enrolled agents can also provide guidance on complex tax situations, such as those involving multiple states, international taxation, or estate and gift taxes. Their in-depth knowledge of tax law allows them to offer strategic advice that can help taxpayers minimize their tax liability while remaining compliant with all applicable laws and regulations.
What is the difference between a CPA, an enrolled agent, and an attorney?
Enrolled agents aren’t the only tax professionals with unlimited practice rights—attorneys and certified public accountants (CPAs) have them, too. So what’s the difference?
The first major difference is that enrolled agents are pure tax specialists, focused solely on tax compliance issues, whereas most CPAs and attorneys are not.
So, if you think your taxes are too complicated to file yourself using online software and are looking for help from a professional, consider hiring an enrolled agent.
Use a CPA or an attorney to help you with something more complicated, such as:
- Looking for ways to minimize your existing business’ tax stress
- Setting up a new business in a way that minimizes tax stress
- Planning an estate with taxes in mind
CPAs don’t necessarily specialize in taxes. They provide a range of services that span the entire accounting profession, including corporate finance, estate planning, financial planning, and reporting. If you need an expert to tell you how to position your business to minimize your tax bill, talk to a CPA that has experience with tax filing and compliance.
Attorneys don’t necessarily specialize in tax compliance either. If you’re incorporating or dissolving a business, evaluating a business deal, getting sued, or looking for help with anything else that goes beyond the boundaries of pure tax advice or accounting, talk to an attorney.
How can I tell whether someone is an enrolled agent?
You can figure out whether someone is a certified enrolled agent, or find enrolled agents in your zip code, using this handy IRS directory of certified tax return preparers.
Simply select your country, input your zip code and search radius, type in the person’s surname if you’re looking up a specific individual, check the “Enrolled Agent Credential” checkbox, and press “Search.”
The form will spit out an alphabetical list of all nearby credentialed enrolled agents, along with a list of any other certifications they may have (e.g., whether they’re a licensed attorney, a CPA, an enrolled actuary, etc.).
How can I make sure my tax advisor is legitimate?
If you’re not sure whether a certain tax advisor or preparer is legitimate, the IRS recommends looking them up with the Better Business Bureau. You can also personally ask the IRS to verify the status of an enrolled agent by emailing epp@irs.gov with the agent’s first and last name, address (if available) and enrolled agent number (if available).
Avoid hiring someone who bases their fee on a percentage of your income tax refund—most licensed, professional tax preparers will never bill you this way. Also make sure that they e-file, since the IRS requires that preparers who do taxes for more than 10 clients must file electronically.
Never send a tax document to the IRS without reviewing it yourself, and make sure that the preparer signs the documents themselves and includes their Preparer Tax Identification Number (PTIN). Licensed enrolled agents, CPAs, and attorneys all have PTINs, and are legally required to include them on any returns they are paid to fill out.
Also, never, ever sign a blank return. If your preparer asks you for one, that’s one of the surest signs that you might be dealing with a tax prep scam.
What’s with all the precautions?
Many tax return preparers are honest and provide great service to their clients. But it’s important to remember that many of the tax preparation shops you see springing up around tax time are also completely unregulated by the IRS. When the U.S. Government Accountability Office went undercover and hired 19 of them during a 2014 study, only two of them ended up filing their taxes correctly. Not filing your taxes properly can get you audited, fined, or worse.
To avoid getting scammed, the IRS suggests making sure that your tax preparer has an IRS Preparer Tax Identification Number (PTIN). Avoid preparers who charge you a percentage of your refund, and never sign a blank or incomplete return. If you think you’ve been scammed, consult this guide and use Form 14157-A to file your complaint with the IRS.
So how can I hire an enrolled agent?
Enrolled agents are pure tax specialists who can help you with tax planning, prepare your tax return for you, and represent you in Tax Court if you ever run into any problems with the IRS. If you have a tax issue that doesn’t require the input of a CPA or an attorney, hiring an enrolled agent is the way to go. But how exactly should you go about hiring one?
In addition to doing your bookkeeping, Bench can connect you to a certified enrolled agent. Access our accountant network, ask to get paired with an enrolled agent, and we’ll get you set up right.
You can also use this handy IRS directory of certified tax return preparers to search for enrolled agents in your area, or this lookup tool from the National Association of Enrolled Agents.
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Doing your taxes isn’t always easy, especially if you’re a freelancer or a small business owner with specific tax needs. An enrolled agent can help you navigate the tax code, make sure you’re filing your taxes properly, and remove a huge layer of stress from your tax season.
Further reading: Tax Resolution—Everything You Need to Know
