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.
“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.
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.”