All accounting majors - and the rest of world - seem to know about Certified Public Accountants. Going through school, through the Accounting Club, in all our classes, much of the focus is becoming a CPA when you graduate.
You already know the long, competitive road you must travel to get there. Not only do you have to work for a firm for two years, you still have to pass the exam in order to have any chance at good income and a future.
What's your other option? I'll bet no one ever told you about Enrolled Agents.
When I was in college, I'd never even heard the term. In fact, it wasn't until the year after I completed my Master's Degree that I ever even heard of this profession.
So, I'm going to tell you about the best kept secret in accounting - the Enrolled Agent (EA).
EAs are very special tax professionals. We've been around since right after the Civil War. Our license comes from the U.S. Treasury Department. So, unlike CPAs, we can practice nationally, without re-certifying or re-testing state-by-state. Like CPAs and attorneys, we are governed by U.S. Treasury Department Circular 230, the ethical bible of tax representation. Recently, through the efforts of Enrolled Agents throughout the country, we obtained permission for accountants to be able to keep their EA status when they became CPAs. (In the past, upon getting certified, accountants had to sacrifice their EA cards.)
Due to the national representation capability, many CPA's are becoming EAs. (In fact, after a seminar I recently held, I got a 'thank you' from someone at KPMG saying that she was inspired to take the EA exam that fall.)
What do EAs do?
We prepare and sign tax returns, represent the client at tax audits, intercede for our clients on collections issues, set up installment agreements and offers in compromise, sign closing agreements regarding a tax liability, Sign consents to extend the statutory period for assessment...
In fact, EAs may take the Tax Court exam and represent taxpayers before the court, without having gone to Law School or sitting for the Bar Exam. Although, I will admit, I know some Enrolled Agents whose reputations are so strong that some Tax Court judges will allow them to represent clients even though they have not taken the Exam. In short, in the eyes of the Internal Revenue Service, we are the nation's tax specialists.
How are EA's Perceived?
In general, most people don't really know about us. And despite how active I am in educating people about EA's, I will admit, many of my clients still tell their friends, or introduce me as a CPA. Let's face it, with hundreds of thousands of CPAs in the country, they've got a bigger public relations budget. (When was the last time you saw a Milquetoast accountant on a TV show who was an EA? No - you've seen CPAs!)
But, within the IRS? Frankly, since I spend a great deal of time in IRS offices, I have gotten to know many auditors and collections officers. We get into conversations. Many of them admit that when they see the rep's power of attorney and it says EA, they perk up a bit. The EA tells them two things:
1) They are likely to be up against someone who understands the tax code.
2) They will be treated with courtesy.
IRS staff admit that, too often, when a CPA or attorney comes in they are full of ego and bluster. Some idiot must have taught them that the way to handle an audit is to be rude, overbearing and to shove their knowledge down the throat of the agent. Imagine how much the agent loves that treatment! Remember - the auditor has power and discretion in your case.
In fact, during one audit, I knew I was going to have a problem because I was dealing with an entertainment industry client with incomplete information. Right up front, I told her the limitations in my presentation. These were going to be my problem areas. And I asked her how she could help me make it work out for the taxpayer. So she helped me.
But, in the course of chatting, she told me that she had a similar situation the day before. The CPA had come in representing a man, in the entertainment industry, the son of a famous performer. He was also missing information - and tried to trick the auditor - and to bully her into giving his client credit for expenses he couldn't prove. The auditor had the discretion to insist on getting documentation - and did. But she admitted to me, "I really felt sorry for his client. If he had come into the office without his accountant, I'd have probably talked it over with him to get a feel about whether he really incurred those expenses for business. I'd have probably given it to him. But his accountant was so rude and made me so mad. Maybe I was a little more nasty than I needed to be." Can you blame her?
As an Enrolled Agent, I have represented people in Hawaii, Texas, New York, all over the place. No government agency has asked me for anything more than my EA number. (Except for the Los Angeles County Tax Assessors' Office, but they're tough on everyone.
Who Should Become an EA? This is a great career for people who want independence. EA's tend not to fit into corporate modes. We live on our own schedule; get creative and artistic; write; make music, travel and shake up the world. You rarely see large firms consisting of Enrolled Agents. This is a business that really lends itself to being run from home. This is great for students working on their degrees, single moms, actors or performers who need flexible schedules, Realtors, retirees who want to keep their brains active, CPAs who want out of the rat race, people who live in RVs and want the freedom to hit the road. This is a profession that can be maintained with a phone line, a modem and laptop computer. You set your appointments with your clients when it suits you. You can control the size of your practice. Although most EAs work year-round, you'll find many of them are closed at least two days a week after tax season. EAs are often gregarious, party folk, play golf, take chances, and give a great deal of personal care and attention to their clients. Often, they perform services that are entirely above and beyond the call of duty. Since so few people know we exist, EAs are often older people. Even our old 'fogeys' are pretty tough! But, there's lots of room for young blood in our profession. In fact, many EAs are looking for people who will stay with them for a couple of years and take over their practices. There's a lot more room for faster partnership potential with a small EA firm than there is in a CPA firm. We are bold. We change tax policy. Either alone or together. One Enrolled Agent is practically single-handedly responsible for the IRS's more lenient policy on personal extensions being filed without any payment. It all came about when Doug Thorburn, a Northridge EA proposed the paperless extension system...but that's another story. What Can an EA Earn? Depending on where you are working, EAs with solid tax experience can earn as much as CPAs. One student of mine passed the EA exam on the first try, with just a little tax preparation experience. She does not have her CPA, but Susan is the manager of a tax department at KPMG in Los Angeles - where they have their choice of all the CPAs in the world. They must think this EA is pretty hot. Typically, EAs charge just a bit less than CPAs for professional services. Although, the more experienced ones have hourly billing rates that are higher than CPAs. I charge $150.00 per hour for consultations, audits and representation. Once CPA I just spoke to only bills $100.00 per hour. Many EAs tend to be better at the fundamentals, like bookkeeping and payroll. For those areas, they typically charge between $25.00 and $50.00 per hour in this part of the world. Comparably less in more rural, less expensive areas. But, I was shocked to discover that the degree in accounting did NOT prepare you to really understand the fundamentals of day-to-day bookkeeping. But it does explain why most CPAs haven't a clue about their clients' down-to-earth business problems. That's why smaller businesses are often better off with Enrolled Agents. EAs have generally have real-life experience, not just book theory. Working for a firm, you can expect to earn anywhere from $10.00 - $50.00 per hour (and up) depending on your skills and expertise. Even H&R Block will hire you for a minimum wage, a small share of your billings and some great entry-level training.
How can you become an EA? It's much less work than getting your CPA. And you can do it while you're still in school. You're already good at taking exams? All you have to is pass a really intense, two-day exam offered each fall by the IRS. No sweat. Pass the test and you're certified. No degree necessary. Even college students can become Enrolled Agents. (I've taught people with limited English and limited tax background to pass the EA exam in one summer. So you, should be able to pass - if you really cram.) Oh, the exam? Actually, it's not a piece of cake. You'll really have to apply yourself. There are four parts, over two days. They cover -
One grandma EA , named Rita, called me about a client who had had his restaurant stolen out from under him by an unscrupulous ‘investor.' As it happens, I was acquainted with that man and knew some of his shortcomings. I knew he had not dotted his ‘i's or crossed his ‘t's.' So, I told her how she could trick them into giving back the restaurant.
Rita got one of her other clients to come along with them to take back the restaurant. that client owned a security company. He brought along a couple of his biggest, meanest-looking guards. They didn't say a word, just surrounded the ‘investor' and his friends, while Rita explained the errors in their contract and why it was an invalid purchase. She pointed out that if they were to take them to court, not only would they lose and have to pay civil penalties, but, she would file charges against them for extortion. I doubt that they listened to a word she said. But, being surrounded by guards, they quietly handed over the keys and walked out.
When I started my degree in accounting, my goal was to learn to be an expert bookkeeper so I could work from home and earn $10,000 per year. Don't ask how long ago that was!
Once you get certified, of course, you'll have to do CPE. The IRS expects 24 hours each year (72 every three renewal period). But the National Association of Enrolled Agents requires 30 hours. We are also bound a stringent code of ethics ... and are regulated by IRS's Circular 230, just like CPAs and attorneys.
So, Now you KNOW.
Now do you understand why the CPA community doesn't want you to know about this career option? If you pass the exam, you'll be able to start earning a decent living while you're still in college. In fact, by the time you graduate, you could have a sizable tax practice of your own. Then, you'll be in a better bargaining position come recruiting time. In fact, you may decide to skip that route altogether - and become your town's expert in taxation.
(Please note, some of my best friends are CPA's and attorneys
Thanks for coming to play with us! copyright © Eva Rosenberg June 10, 2000 Internet publication rights - accountingweb.com
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