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Another Option for Tax Preparation: Enrolled Agents

They cost less and are certified by the IRS. But they still need to be vetted before hiring.

Another Option for Tax Preparation: Enrolled Agents
Image: Westend61 | Getty
Westend61 | Getty

Pastors and church leaders often ask accountants and attorneys to help prepare their taxes but may overlook another tax preparer worth considering: the enrolled agent (EA). The EA is the highest credential given by the Internal Revenue Service (IRS), and it is earned either by passing a comprehensive three-part test or based on the individual’s prior experience as an IRS employee.

“Elite status”

“Enrolled agents, like attorneys and certified public accountants (CPAs), have unlimited practice rights,” the IRS explains on its website. “This means they are unrestricted as to which taxpayers they can represent, what types of tax matters they can handle, and which IRS offices they can represent clients before.”

The agency describes the EA as “elite status,” and indicates high ethical standards must be followed, including at least 72 hours of continuing education requirements to be completed every three years.

The IRS’s EA test is challenging, and the ongoing continuing education requirement is substantial, says attorney and CPA Frank Sommerville, a Church Law & Tax senior editorial advisor who was an EA prior to earning his CPA license.

Lower fees and more experience in tax prep

“I personally know of enrolled agents to whom I would confidently refer ministers for tax prep,” says CPA Michael Batts, a senior editorial advisor for Church Law & Tax. “In reality, few tax attorneys actually prepare individual tax returns. Fees for EAs can also be less than those of a CPA.”

The lower rate for an EA becomes especially compelling, Sommerville notes, when considering that tax preparation is not part of the practice of law for attorneys and also the fact that there is a “very small percentage of CPAs who concentrate on tax, and an even smaller number who concentrate on tax return preparation.”

Experience is essential

The key criteria for selecting an EA, advisors say, mirrors the same one for choosing a tax attorney or CPA: experience.

“The focus needs to be their level of experience with ministers’ tax returns, whether it is an attorney, a CPA, or an EA,” says CPA Vonna Laue, another Church Law & Tax senior advisor. “EAs may be very knowledgeable about taxes, but this is a specialized area.”

Sommerville says, “I would not hesitate to recommend an EA if they prepared at least 50 minister returns per year and had practiced for 10 years or more—the same standard I have for CPA and attorney referrals.”

While EAs are not regulated by any state supreme courts (as attorneys are) or state boards of accountancy (as accountants are), or by any “self-regulating professional bodies” like both of those professions, the IRS oversight still lends credibility to EAs’ qualifications, says Ted Batson, a tax attorney and CPA with CapinCrouse who serves as a Church Law & Tax advisor-at-large. Their ability to represent clients before the IRS is especially useful, he says.

The screening steps Senior Editor Richard Hammar recommends for attorneys and CPAs should still be followed for EAs, though, Batson adds.

Hammar also believes an EA with proper experience can handle “routine tax returns.” But note that he still recommends hiring “a CPA or tax attorney for more complex tax questions requiring legal research.”

Matthew Branaugh is editor of content and business development for Church Law & Tax at Christianity Today. He earned his juris doctor (JD) with honors from the University of Denver Sturm College of Law.

This content is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. "From a Declaration of Principles jointly adopted by a Committee of the American Bar Association and a Committee of Publishers and Associations." Due to the nature of the U.S. legal system, laws and regulations constantly change. The editors encourage readers to carefully search the site for all content related to the topic of interest and consult qualified local counsel to verify the status of specific statutes, laws, regulations, and precedential court holdings.

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Posted:
  • February 27, 2020

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