WHAT IS AN ENROLLED AGENT?
An Enrolled Agent is a person that may represent taxpayers before any type of IRS office. Those with experience as a former IRS employee may also qualify to be an Enrolled Agent. The Enrolled Agent status is the highest credential issued by the US Treasury. Individuals who obtain this highly respected credential must abide by ethical standards and complete 72 hours of continuing education courses every three years. Just like a certified public accountant, or tax attorney, an Enrolled Agent is given virtually unlimited practice rights before the IRS.
Representation is defined by the IRS as the following activities:
- Communicating with the IRS on behalf of a taxpayer regarding the taxpayer's rights, privileges, or liabilities under laws and regulations administered by the IRS.
- Representing a taxpayer at conferences, hearings, or meetings with the IRS.
- Preparing, filing or submitting documents, or advising on the preparation, filing or submission of documents, including tax returns, with the IRS on behalf of a taxpayer.
- Providing a client with written tax advice on one or more Federal tax matters.
In conclusion, there are virtually no restrictions to the variety of tax issues an Enrolled Agent can handle and the type of tax clients they can serve.
WHAT CAN AN ENROLLED AGENT DO?
As a tax preparer, an enrolled agent is the best defense against IRS enforcement issues. Because EA’s serve as the liaison between a taxpayer and the IRS, they can reduce the stress and confusion a taxpayer may experience as a result of an audit. Enrolled Agents are required to ensure that all of the proper forms are filed for their clients. Unfortunately there aren’t many regulations in place to protect taxpayers from negligent or under-trained tax preparers. A Preparer Tax Identification Number (PTIN) is the only thing required to become a Tax preparer that prepares and files federal and state tax returns. Getting a PTIN is a fairly easy thing to do and requires nothing more than a quick registration on the IRS website. While this simple process is a low hurdle for those considering a move into the tax industry, it can expose taxpayers to an undertrained group of individuals that may not be able to serve in the best interests of their clients.
By earning the EA credential, an Enrolled Agent is able to set themselves apart from other tax preparers that are new to the industry. Enrolled Agents are known to be capable, qualified tax experts that not only offer the best tax advice, they act as the trusted go between the IRS and their clients. The peace of mind an EA can give allows them to not only give great advice, it also allows them to make life-long clients and friends along the way.
WHAT IS THE OFFICE OF EXAMINATION?
To ensure accurate reporting and rectify tax reporting mistakes, the IRS audits both individual and business tax returns. Being selected by the IRS for an audit does not always suggest there’s a problem. The IRS uses various methods as part of their audit process selection:
The IRS conducts random audits of taxpayers returns through its National Research Program (NRP). This random audit system was established in 2000 and replaced a prior initiative known as the Taxpayer Compliance Measurement Program (TCMP). Randomized selection and computer screening occurs when tax returns are chosen based on a statistical formula of returns. These returns fall outside these “norms” for similar returns which is why they get flagged for review. As an Enrolled Agent you will be tasked with responding on behalf of your clients to audits generated via this process of random selection.
The IRS may select returns of a taxpayer when they involve issues or transactions with other taxpayers, such as business partners or investors, whose returns were selected for audit. Understanding these processes and knowing how to respond to them can help alleviate some of the stress a taxpayer may face. It is here an Enrolled Agent works with the IRS or state agency to determine the status of client’s tax debt. During this process the Enrolled Agent communicates with clients to correct the issue and advise their tax client how on how to achieve compliance moving forward.
HOW MANY HOUSEHOLDS GET AUDITED BY THE IRS EACH YEAR?
In 2017, there were approximately 1.1million examinations of tax returns. In this group more than 24,000 taxpayers did not agree with the IRS examiner’s determination, which resulted in an uncollected tax of almost $11.5 billion. A taxpayer in this situation can either ignore the findings of the IRS examiner, (obviously not advisable), they may pay the penalty, or they may request the professional help of a CPA, Legal Counsel, or an Enrolled Agent.
TWO TYPES OF IRS AUDITS
In general, there are two types of audits, a correspondence audit, or an in-person field examination. In FY 2017, examinations generated a total of around $3.7 billion in refund payments. Approximately $80.6 million from correspondence examinations and nearly $3.6 billion came from in-person field examinations conducted by IRS revenue agents.
A correspondence audit is where the IRS will communicate its inquiry entirely by mail on a given tax return. The taxpayer will receive a letter from the IRS which may require the taxpayer to provide additional documentation.
In Person Field Examination
The second is the in-person (field) audit/ examination. These audits may be conducted at either the organization's location, the organization's representative's office, or a local IRS office. Most commonly audits are conducted by an IRS revenue agent who visits the organization's location.
OFFICE OF COLLECTIONS
When taxpayers owe money to the IRS they will receive a bill for the amount they owe from the IRS Office of Collections. This bill starts the collection process which continues until the taxpayer's account is satisfied or until the IRS may no longer legally collect the tax. As an Enrolled Agent, you can assist clients in establishing Offers in Compromise (settling tax liability for less than the full amount owed), and creating Installment Agreements (payment plans). Enrolled Agents may also assist in extending collection periods (giving the IRS more time to collect and the taxpayer more time to pay), abatements (reducing penalties), releasing liens, and preventing a levy (seizure of property).
A TRUE TAXPAYER ADVOCATE
Nobody wants to be on the wrong side of the IRS, but each year more than 20,000 taxpayers are asked by the Office of Collections to pay additional taxes owed. These situations arise partially due to the amount of seasonal, unenrolled tax preparers, as well as the complicated structure of the tax code itself. As an Enrolled Agent, you are able to assist clients when back taxes are owed and help them come up with a plan to avoid future reporting errors. Having unlimited representation rights does just mean you are able to speak to the IRS, it means you to take your practice a seasonal part time career to one that works year round to help both individuals and business with their needs. Are you ready to move into tax representation?
HOW DO I BECOME AN ENROLLED AGENT?
As you may know, the letters "EA" after your name show clients you have the necessary training & tax knowledge to think through and resolve most of the problems taxpayers face. There are a few steps you will need to know in order to become an Enrolled Agent. Below please find our steps to attain your Enrolled Agent credential, reading through these steps will help take the guesswork out of the process.
STEP 1: GET YOUR PREPARER TAX IDENTIFICATION NUMBER (PTIN)
Anyone who prepares or assists in preparing federal tax returns for compensation must have a valid PTIN. If you don’t already have a PTIN, you can apply for one online through the IRS website, www.irs.gov/ptin. Even after you become an Enrolled Agent, your PTIN will need to be renewed annually.
STEP 2: PASS THE SPECIAL ENROLLMENT EXAMINATION (SEE)
Unlike certified public accountants or tax attorneys, no additional education or experience requirements are required to become an EA. To earn your EA credential and prove your knowledge in taxation, you’ll need to pass the IRS Special Enrollment Examination (SEE), also more commonly known as the EA exam.
The Enrolled Agent Exam is comprised of 3 parts:
- Part 1 — Individuals
- Part 2 — Businesses
- Part 3 — Representation, Practice & Procedure
You have 24 months to pass the three parts of the EA exam. Because you have ample time and due to the exam fees, we recommend taking your time and focusing on only one part at a time. At one time a perspective Enrolled Agent would need to prepare for and pass all three parts of the EA exam in a short period, but those days are long gone. Today you take each part of the exam separately to test your knowledge of advanced tax topics. To prepare, you want to choose an Enrolled Agent exam review course that is clear and concise in its delivery of the course material You will want an EA course that covers all of the core concepts and also gives you the flexibility to learn at your own pace.
The exam is administered by Prometric and is available May 1st through February 28th of each year. No testing is available during the months of March or April. You will want to create an account at prometric.com to choose a testing center and schedule a day and time to take the exam. You may also contact Prometric by calling 800-306-3926 to schedule your exam. Prometric operates thousands of test centers in more than 160 countries worldwide, so there’s a good chance that you’ll be able to find a location near you.
STEP 3: SUBMIT FORM 23
Once you have successfully passed all 3 parts of the Enrolled Agent exam, you’ll need to fill out and submit Form 23. Form 23 is the application for Enrollment to Practice before the IRS. The IRS then conducts a background check to protect the general public from individuals that may have previously breached public trust, such as fraud. The IRS will also perform a tax compliance check. A compliance check is a review of information forms that the IRS requires taxpayer to file or maintain; for example, 940s, 941s, W-2s, 1099s, or W-4s. During a compliance check, the IRS may ask taxpayers whether they understand or have questions about the filing requirements for these forms. The IRS may also ask the taxpayers if they filed the proper forms for any workers to whom they made payments. If not, and the taxpayer acknowledges they should have, the IRS may ask the taxpayer to file them voluntarily. If the taxpayer does not voluntarily file the forms, the IRS may prepare substitute returns under Internal Revenue Code Section 6020(b) or initiate an examination.
The IRS will not ask to examine any books and records during a compliance check or ask questions regarding tax liabilities. This means that the IRS will not ask taxpayers why they treat an expense a certain way or the reason they treat a worker as an employee or independent contractor. IRS typically asks these types of questions during an audit or examination to determine an entity’s correct tax liability. If, during a compliance check, the IRS decides an audit or examination is appropriate, the IRS will notify the taxpayer that it is commencing an examination before asking questions that relate to tax liability. Your enrollment could be denied if you’ve failed to file or pay your taxes in a timely manner. It can take up to 60 days for the IRS to process your application. You will receive your Certificate of Enrollment in the mail after clearing the background and tax compliance checks.
STEP 4: MAINTAIN YOUR ENROLLED AGENT LICENSE
Becoming an Enrolled Agent is the first step in growing your business. Having your EA credential allows you to work on more complex tax returns therefore charging higher fees. As an EA you will also be able to work across state-lines while establishing yourself as a national credentialed tax expert. The privilege of holding the Enrolled Agent title comes with great responsibility too. Enrolled Agents are looked at as trusted knowledgeable experts in tax. Working with clients throughout the year will give you every opportunity to learn and grow in what should be a profitable and fulfilling career. To get started you will want to pass all three parts of the Enrolled Agent exam.
Below are a few tips for passing the Enrolled Agent Exam the first time:
WHERE TO FOCUS YOUR EFFORTS TO PASS THE EA
Do you know what it takes to get your Enrolled Agent credential? Knowing what is on the exam and where to focus your efforts will help ensure you are better prepared. Please take a moment, if you have not already done so, please take a moment to create an account at enrolledagentexam.com. Doing so will give you some insights on what the core areas of study should be, upgrading to the paid subscription will get you prepared for all three parts for less than $100.
TAKE DAILY/ WEEKLY ACTION TO GET YOUR EA CREDENTIAL
If you plan to pass all three exams in 3-4 months, you need to set goals and deadlines for passing each part. Having an end goal of passing the EA exam is great but it’s too large and the path to stray is too great. There are way too many moving parts and the only real way to succeed is to break that large goal down into daily action and achievement.
WHAT IS YOUR DAILY GOAL?
Answer: Read for 60 minutes. Watch 20 Minutes of video lectures today, Answer 25 Questions – “Individuals”
WHAT IS YOUR WEEKLY GOAL?
Answer: Read for 5 hours. Answer 100 Questions – “Individuals”
Do you see how these definitive goals require you to take daily and weekly action? Having real goals written down on a calendar or organizer helps you take manageable steps toward the much larger goal of getting your enrolled agent credential. Each day needs to be one that’s moving you closer to your goal, activities that are not part of your study plan are taking you further away. Be sure you include some days off for rest. Most students need a couple days to decompress from the heavy study and EA exam prep is no different.
ASK FOR HELP ON DIFFICULT TOPICS
You spend countless hours staring at a computer screen, reading your study guide and getting lost in the EA prep course material. If you cannot find a study partner, take time to connect with others in our community. Both enrolledagentexam.com and Fast Forward Academy offer access to an enrolled agent community.Fast Forward Academy’s is an established community full of active students, EAs and CPAs that can help you. No matter where you are: watching a video lecture, taking a quiz, or reading the online study guide, you can learn important concepts by joining the discussion that’s just a click away from your studies.
The enrolledagentexam.com is new but growing and over time you will find that you can not only get help but you can also help others there too. So take time to ask for help and help others in the community too. Studies show connecting and helping other students will enable you better retain the information you are working to learn yourself.
WHEN TO SCHEDULE THE REAL EXAM
In most cases you can take the real exam once you are getting 80% on a practice exam. It’s important to schedule the real thing right away and to keep the information fresh in your mind up the day you test. To stay sharp you need to take quizzes, understand the core concepts and explanations of those questions and also interact in the community. By taking notes, and using the digital flashcards, you will effectively be filling your mind with new fresh information to use come exam time. One of the best ways to prepare is to write your own parking-lot cram-notes. This will allow you to study right up to the minute you walk in Prometric to take the exam. Again passing the EA exam is not easy, but it will be a lot easier if you can fill your brain full of fresh information right up to the point where you take the exam.
ON TEST DAY
It goes without saying that you should not be taking the real exam if you have not fully studied all the concepts of the part you are taking. Surprisingly each year countless students go in blind and try winging it, you cannot wing the EA exam! If you are not feeling good about your preparation you might consider rescheduling the exam. If you do it far enough in advance Prometric may only charge a small reschedule fee which is far better than having to shell out another $181 to take another shot. How do you feel, are you ready?
Once you feel good comes the real preparation: relaxing. To perform you need to be relaxed, to get yourself into a relaxed state, you will want to clear your plate of as many distractions as possible. Be sure to get a full night of rest the night before your exam and on test day, eat a hearty but healthy breakfast. It's not always possible to go into exam day stress free but by making your exam a priority and putting your success first you are laying the foundation for success!
On test day, enter the building with confidence knowing you can succeed and by following the right steps, you will!
DID YOU FAIL A PART OF THE ENROLLED AGENT EXAM? WHAT YOU NEED TO DO NEXT
You have embarked on a journey of self-improvement to become an enrolled agent. Like any credential that takes effort, it can help you in your career. Achieving the enrolled agent designation means that you have demonstrated a special competence in tax matters granting you the same privileges as an attorney or CPA in representing any taxpayer for all federal tax matters before any office of the IRS.
As you prepare for the EA exam, you are in a continual state of preparation until you pass. There is no failure and you need to think about your studies and practice exams as a journey. Passing the EA exam is a long road that takes some work. There will be highs and lows along the way but the only failure is when you cease to try. Just as some folks can pass all three parts of the EA exam the first try, others may fail at a couple of parts before they get through them all. You can hold your head high as long as you continue to do the work and put in the effort.
Open your book or if you need a more in depth course give Fast Forward Academy a try. You need to study with the intention of winning to do that you want to refocus your efforts. Fill your head with good information by reading and then watching some video lectures to dig deeper into a subject. Get involved with the community and see if you really are mentally in the game. Take some quizzes to see how much you retained. Whatever you do, please study and prepare to win. If you don't study with the intention of passing you are not fully committed. As obvious as all of this is, many students just go through the motions, you cannot afford to waste your time this way. If you find passion waning, take a moment to remember all the reasons why you want to pass the EA exam and then reset your inner drive. The approach you take each day should be no different than the way an athlete approaches a competitive match. It’s you against the exam and you need to dive in every time with the intention of winning.
If you failed a part of the Special Enrollment Examination, it most likely means you skipped a step in the Pre-Examination Checklist. Take a breath, regroup, and get back to it, you can do it if you learn the information. You have two years to pass all three parts and can take each part up to four times in a given year. Each time you open your book, finish a practice exam, or fail at the real thing, remember that these are opportunities to get better, so don’t give up.