Everything You Need to Know About Hiring a Tax Professional

Jowanna Daily

Expert Contributor
Last Updated: December 9, 2021

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Enrolled agents (EAs), certified public accountants (CPAs), and tax attorneys are all tax professionals who can help you resolve back taxes problems. There are even Attorney-CPAs who can act as both your attorney and CPA. However, there are pros and cons to each role. Their advantages and disadvantages depend on what you need and the severity of your tax issues. When looking to hire a tax professional, understanding these roles will help you make the best decisions possible for your tax needs.

What Is an Enrolled Agent?

An enrolled agent (EA) is a tax professional licensed and authorized by the U.S. Department of Treasury to represent taxpayers. While an EA is the highest credential status the IRS awards, it is the least educated of all tax professionals. However, many individuals underestimate how helpful an enrolled agent can be, particularly when it comes to knowing IRS tax codes.

How to Become an Enrolled Agent

An enrolled agent goes through an intensive vetting process. Most enrolled agents must pass a three-part exam. Anyone who wants to become an EA must acquire and maintain the designation.

The person must first acquire a Preparer Tax Identification Number (PTIN). This process requires the candidate to submit personal and professional information, including his or her address, business name, experience, criminal history, and explanation of any tax issues.
After acquiring a PTIN, the candidate must pass all three parts of the Special Enrollment Exam (SEE).
If the individual passes the exam, he or she must then submit the EA application. After passing the SEE, the candidate must also pass a compliance check to receive the enrolled agent designation.

To maintain an enrolled agent status, an EA must:

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Renew his or her status every three years.
Meet continuing education requirements.
Renew the PTIN yearly.

What Can an Enrolled Agent Do?

An enrolled agent can help you with a variety of tax issues. Enrolled agents can perform many of the functions a CPA can do. In addition to being experienced in dealing with IRS issues, an enrolled agent can perform many tasks, including the following:

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Helping you with personal taxes and estate planning.
Representing you before the IRS when you face an audit or you need help settling back taxes.
Preparing, correcting, and filing your personal (or business) tax returns.

Benefits of Using an Enrolled Agent

There are many benefits to using an enrolled agent. Consider the following when deciding what type of tax professional you need:

EAs are more affordable than a CPA or a tax lawyer.
While tax lawyers and CPAs are geographically limited to practicing in the state where they received their license, EAs can practice in any state.
Enrolled agents hold a federal license and are federal tax code experts.
They can represent you through the entire process, up to (but not including) tax court.
They are regulated by the Department of Treasury and must abide by a strict code of ethics.

Disadvantages of Using an Enrolled Agent

You may be dealing with the IRS for a variety of reasons that may range from an error on your tax return to tax evasion. While there are many benefits and reasons to use an EA, you need to think about the issues you are having with the IRS, how severe they are, and the impact they will have on your life. There are some disadvantages to using enrolled agents:

They are generally not as educated as a CPA or a tax attorney.
They cannot represent you in tax court unless they have passed the “Tax Court Exam for Non-Attorneys.”
While they are subject-matter experts when it comes to the federal tax code, they do not have the same educational breadth and depth as a CPA or a tax attorney.

When to Use an Enrolled Agent

Though an enrolled agent may not have the same education as a CPA or a tax attorney, he or she is well qualified to represent you with your IRS matters. Still, consider the complexity and severity of your tax issues before hiring a CPA. Typically speaking, the more straightforward your case, the more likely you can employ an EA. You may consider hiring an enrolled agent in certain situations, such as if you:

Need a tax professional to help you with a personal or business tax return that does not have specialized deductions.
Are under an IRS audit, but you have not committed any crimes.
Need general tax advice and guidance.

What Is a Certified Public Accountant?

A certified public accountant, or a CPA, is the most coveted designation in the accounting world. CPAs are very well trained and can help keep your business in alignment with tax laws. They can also help you with your taxes and with IRS tax matters.

How to Become a CPA

CPA licensure qualifications vary by state. However, general requirements are as follows:

An undergraduate degree.
Two-years of public accounting experience. Some states take experience in other industries, but you may need more years of experience to qualify.
Successfully passing the CPA exam.

Some states have a one-tiered qualification system, while others have a two-tiered system. In a one-tier system, you get your certification and license at the same time. In a two-tiered system, you can get the certificate by passing the exam, but you must meet the other requirements before you are licensed to practice. Because all states are different, check with your local state board to find out the certification and licensure requirements.

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What Does a CPA Do?

A CPA can do a wide range of services, including:

Account financial reporting
Auditing
Managerial accounting
Tax accounting
Internal audits.

There are two distinct roles a CPA can fill that an enrolled agent cannot:

A CPA can prepare, review, and file financial statements with the Securities and Exchange Commission (SEC).
A CPA can also represent clients in front of the IRS.

Advantages of Hiring a CPA

It is hard to dispute that hiring a CPA comes with many advantages, especially when it comes to your taxes. The more complex your situation, the more likely you would want to hire a CPA instead of an enrolled agent.

A CPA can do anything an EA or a non-CPA accountant can do.
A CPA can file financial statements with the SEC.
A CPA can help uncover and explain the financial impacts of specific tax decisions.
A CPA can help you save money because of his or her skills in financial analysis.

Disadvantages of Hiring a CPA

One cannot dispute the benefits of hiring a CPA when it comes to understanding, resolving, and managing tax and financial matters. However, if you have a limited budget to address your tax concerns, then consider the following before hiring a CPA:

CPAs are expensive. You may want to consider hiring an EA for routine tax functions and for uncomplicated tax disputes or issues.
CPAS are limited to practice in the state where they received their certification and license.

When to Use a CPA

There are certain situations when you want to use a CPA versus an enrolled agent:

Use a CPA if you run a public company. CPAs are the only ones that can file mandated paperwork with the SEC.
If you have multiple income streams and assets, a CPA can help you navigate through the tax laws and save you money while keeping you in compliance.
If you are starting a business, a CPA can help you with your financial setup.
If you come into a considerable sum of money or want to give someone a sizable monetary gift, then a CPA can help you minimize the amount of gift tax you have to pay.

What Is a Tax Attorney?

Tax attorneys specialize in understanding tax laws and can help you resolve tax problems. They are well vetted in tax laws and stay up to date with IRS regulations and tax laws. They can also help with tax planning.

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How to Become a Tax Attorney

To become a tax attorney, a person must first receive an undergraduate degree, complete law school, and pass the bar example.

The road to becoming a tax attorney usually begins with a bachelor’s degree in business or accounting.
A law student candidate must first pass the Law School Admission Test (LSAT) before applying for law school.
The student must then be accepted to an American Bar Association credited law school.
Tax lawyers must both graduate with a Juris Doctor (JD) degree and pass the state bar exam. A lawyer cannot practice law without passing the bar.

Some tax attorneys also sit for the CPA and can serve as an Attorney-CPA.

What Does a Tax Attorney Do?

Tax attorneys help their clients with a wide variety of financial and tax issues. There are overlaps in the EA, CPA, and tax attorney roles.

A tax attorney can help you with any financial matter where there are tax implications, such as estate planning and other financial wealth issues.
They can represent you in criminal court proceedings, such as tax evasion.
They can help you with IRS settlements and appeal judgments against you.

Tax attorneys may have a practice or work within a larger firm. They may work with individuals, non-profits, public, private companies, etc.

Advantages of Hiring a Tax Attorney

Tax attorneys are not only knowledgeable in tax law, but they also know how to conduct extensive research that can make a difference when you are dealing with highly sensitive matters.

If you are facing serious charges, such as tax evasion, then you are protected under attorney-client confidentiality privileges.
Since tax attorneys specialize in tax law, they are trained to represent you in IRS proceedings.
Tax attorneys can help save you from future tax issues during financial and estate planning.
They are mainly helpful when it comes to any controversial financial or tax situations.

Disadvantages of Hiring a Tax Attorney

Tax attorneys are expensive, so you should avoid hiring them for simple tasks you can do through an EA or a CPA. Like CPAs, tax attorneys can only practice in the region where they are licensed to practice law.

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When to Hire a Tax Attorney

There are certain circumstances, including the following where a tax attorney is needed:

If you are starting a business and need help deciding which structure is best.
If you want to sue the IRS.
If you need help with estate or financial planning.
If the IRS is suing you.
If you are under criminal indictment and need attorney-client privilege protection.

Attorney-CPAs

Attorney-CPAs are a type of tax professional that is qualified as attorneys and certified public accountants. A dually qualified tax professional can help you through the most complex tax issues. They have the most extensive and comprehensive training because they must meet the rigorous qualification of an attorney and a CPA

Advantages of Hiring an Attorney-CPA

Because they are dually trained, you may save money by not needing to hire both an attorney and a CPA.
Their background allows them to cross-examine expert witnesses such as tax advisors.
They are equipped to handle tax audits and litigations.
They can serve as an expert witness on your behalf.
They are qualified to handle all your tax needs.

Disadvantages of Hiring an Attorney-CPA

Attorney-CPAs are expensive. You may not get the value for your dollar when dealing with routine tax functions or issues. Consider your needs before hiring an Attorney-CPA.

When to Hire an Attorney-CPA

If you are in a serious dispute with the IRS that calls for both understanding the law and interpreting financial data, then you could benefit from hiring a dually qualified tax professional.

There are specific instances where an attorney can nullify attorney-client privileges, so be sure to pick a tax professional with a proven litigation background.

If you need help finding a qualified tax settlement company to fit your needs and budget, let our team help you find the best match. At Solvable, we have done the hard work for you. We use our digital platforms to review the best companies after we have performed an extensive verification. Do not waste your time spending hours searching for a tax settlement company instead of working on settling your IRS back taxes

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Jowanna Daily

Expert Contributor
Last Updated: December 9, 2021

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