Benefits of Becoming an Enrolled Agent
What is an Enrolled Agent (EA)?
An enrolled agent is a person who has earned the privilege of practicing, that is, representing taxpayers before any office of the Internal Revenue Service. An enrolled agent can negotiate with the IRS during examinations and appeals, and act in place of a taxpayer signing consents and executing agreements on their behalf. An enrolled agent is the only professional granted a right to practice directly from the U.S. government. Attorneys and certified public accountants (CPA) have state licenses, which limits their practice only to the states where they are licensed. Unlike a CPA or Attorney, an enrolled agent holds a federal license and has the right to represent any taxpayer in any state regarding federal tax matters. An enrolled agent is considered a tax specialist, which sets them apart from attorneys or CPAs who do not always specialize in taxes. The practice of enrolled agents before the IRS is not limited and they may represent taxpayers before the IRS, performing the same tasks as an Attorney or CPA. The capabilities of an enrolled agent extend beyond just preparing returns to areas such as representing clients in cases involving audits, collections, and appeals.
Separate yourself from the crowd
An un-enrolled return preparer may not sign documents for a taxpayer and may only represent taxpayers in limited situations before revenue agents and customer service representatives. An un-enrolled preparer's ability to practice before the IRS is very limited. Generally, it is limited to the examination function of the Service, and only with respect to a return he or she prepared. Consequently, an un-enrolled preparer cannot practice before appeals officers, revenue officers, and Counsel. In addition, an un-enrolled preparer cannot execute claims for refund, receive refund checks, execute consents to extend the statutory period for assessment or collection, execute closing agreements, or execute waivers of restriction on assessment or collection of a deficiency in tax.
Why Become an Enrolled Agent?
- IRS Examinations are up over 100% - According to enforcement results published by the IRS in 2009 examinations of individual returns increased over 100% since year 2000. Throughout this period, the number of examinations rose every year through 2009. Current plans are for a substantial increase in examinations from present levels.
- Growing need for representation - Given the state of our economy, many people now find themselves in a difficult position financially. As you might imagine, many are delinquent on their tax obligations. With IRS enforcement activities on the rise, there is a growing need for enrolled agents who can assist taxpayers in dealing with IRS collection activities.
- Unlimited Earning Potential, Enrolled Agent Salary - You control your career. Why wait for someone to hire you? You can start your own business with unlimited earning potential. As a business owner, you may work full or part time, it is up to you to control your enrolled agent salary.
- Recession proof career - Income taxes are not going away anytime soon. Competent representation is hard to find, and the enrolled agent designation can help you reach the pinnacle of your profession by allowing you to offer a wide range of services beyond just tax preparation.
- Industry Rules are Changing - IRS registration is mandatory for all paid preparers. A preparer who is not an attorney, certified public accountant, or enrolled agent, must satisfy a competency test and continuing education requirements. The practice of the new category of preparers will be limited to preparing tax returns for compensation and representing taxpayers in an examination only on a return they prepared. If you plan on preparing returns, you might as well get a designation
- Expand your financial practice - If you are a financial planner already in the business of advising clients, an enrolled agent designation can provide you with an opportunity to offer additional services.
- Expand your reach - If you are a CPA or Attorney, your ability to practice is limited to states where you hold a license. The enrolled agent designation is a federal authorization that can provide you with the ability to represent clients in other states.
- Credibility - The credibility you gain as an enrolled agent can help you command higher fees than others who have not demonstrated their competence.
- Increased Expertise – Becoming an enrolled agent will improve your knowledge about the various rules and regulations can help make you a better tax practitioner.
Requirements for Enrolled Agents
An enrolled agent (EA) does not need a college degree; rather they must demonstrate special competence in tax matters by passing all three parts of the IRS Special Enrollment Examination. An individual with 5 years of relevant employment with the IRS may apply for enrollment to become tax agent (EA) without taking the exam.
How to Become an Enrolled Agent?
You must file Form 23, Application for Enrollment to Practice before the Internal Revenue Service, within one year of the date you passed all parts of the examination. Form 23 is available online at www.irs.gov. The IRS may take approximately 60 days to process your request. During that time, a background check is performed to ensure that you have not engaged in any conduct that would justify the suspension or disbarment of an attorney, CPA, or enrolled agent from practice before the IRS.
The IRS Special Enrollment Examination (SEE):
The EA Exam, officially known as the Special Enrollment Examination (SEE), is a three-part exam administered by Prometric on behalf of the Internal Revenue Service. Each part is taken as a separate 100 question EA exam and you will have 3.5 hours to answer all questions for that part. A new EA examination period commences each year on May 1 and continues through February 28 of the following year. No testing occurs during March or April. The period that begins on May 1, 2012 will include questions based on the 2011 tax year. A passing score on each part of the SEE exam is required before the IRS will admit an enrolled agent to practice. Scaled scores are determined by ranking your EA test results against others taking the examination, on a scale ranging between 40 and 130. A score of 105 is the minimum required to pass the SEE. Test results are available immediately following the EA test. Those who pass are informed, but they do not receive a score. Those who fail receive a score along with a diagnostic report indicating the areas of weakness. A candidate may re-take each part up to four times each testing period. There is a two year window from the time you pass the first part, to pass the other two parts of the SEE exam.
How to Register for the IRS Special Enrollment Exam
All candidates who wish to schedule an EA examination need a Preparer Tax Identification Number (PTIN) - To obtain a PTIN, you will need to complete a W-7P by mail, fax or online at www.irs.gov. The online method is quickest and provides you with the instantaneous issuance of the PTIN.
EA Examinations are administered by computer at Prometric testing centers. Currently, the Special Enrollment Examination is given at nearly 300 Prometric testing centers located across the United States and internationally. Test centers are located in most major metropolitan areas. Once you have your PTIN, you may register online at www.prometric.com/irs for your Special Enrollment Exam.
| Part 1 - Individuals |
Percent of Exam |
| Section 1: Preliminary Work and Tax Payer Data |
15% |
| Section 2: Income and Assets |
25% |
| Section 3: Deductions and Credits |
25% |
| Section 4: Taxation and Advice |
20% |
| Section 5: Specialized Returns for Individuals |
15% |
| TOTAL |
100% |
| Part 2 - Businesses Percent of Exam |
Percent of Exam |
| Section 1: Businesses |
45% |
| Section 2: Business Financial Information |
40% |
| Section 3: Specialized Returns and Tax Payers |
15% |
| TOTAL |
100% |
| Part 3 - Representation, Practices and Procedures Percent of Exam |
Percent of Exam |
| Section 1: Practices and Procedures |
33% |
| Section 2: Representation before the IRS |
25% |
| Section 3: Specific Types of Representation |
25% |
| Section 4: Completion of the Filing Process |
17% |
| TOTAL |
100% |
Question Types
The questions are multiple choice. Each provides four options from which you choose your answer. Three different multiple-choice formats are used.
Format 1 - Direct question - Which of the following entities are required to file Form 709, United States Gift Tax Return?
A. An individual
B. An estate or trust
C. A corporation
D. All of the above
Format 2 - Incomplete sentence - Supplemental wages are compensation paid in addition to an employee’s regular wages. They do not include payments for:
A. Accumulated sick leave
B. Nondeductible moving expenses
C. Vacation pay
D. Travel reimbursements paid at the Federal Government per diem rate
Format 3 - All of the following except - There are five tests which must be met for you to claim an exemption for a dependent. Which of the following is not a requirement?
A. Citizen or Resident Test
B. Member of Household or Relationship Test
C. Disability Test
D. Joint Return Test
The Best Strategy to Pass on the First Attempt:
Fast Forward Academy has a number of tools to help best prepare you for the Special Enrollment Exam (SEE) with a comprehensive enrolled agent review course including a study guide, free online test bank, and practice exams. As you know, the EA exam is graded on a curve so here’s how to use our EA review course to give yourself a competitive advantage.
The best strategy to help you pass the first time:
- Attack one section at a time, do not try to study for all 3 tests at once
- Use the EA study guide and the free online test bank to study each section of the exam thoroughly
- Once you think you’re ready for the real thing, take a Practice Exam on that section to measure your preparedness
After you have taken a practice exam, you may still need to study further. Here’s how to read the simulated practice exam momentum meter...
- Momentum of 79% or less, use the reports to find out where you’re weak. Go back to the study guide and free online test bank and attack the weak areas. Then, take another practice exam to measure your improvement.
- Momentum above 80%, use the reports and focus on the areas where you answered questions incorrectly. Use the study guide and free test bank to sharpen up in those areas and go take the exam! The free test bank momentum meter is different, but the higher the better. In either tool, you can review your answers, whether correct or incorrect, and review the rationale. Plus we always list the exact chapter in the EA book to reference so you can improve in that specific area. Between the book and the testing tools, you will have covered every topic needed to pass the exams the first time.
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