A CPA is a Certified Public Accountant, and an EA is an Enrolled Agent and as a business owner, it’s valuable to recognize the difference between these two experts to understand how their expertise can help you and your business. The first step is identifying the basis for the acronym.

Both experts can benefit your business, but there are also limitations on how they can help your business. I will begin by describing the educational requirements for both experts, the limitations of their expertise, and the services they can provide to clients.

What are the educational requirements for a CPA?

To become a Certified Public Accountant (CPA) in the United States, one must meet specific educational, examination, and experience requirements. In most states, that person must have completed 150 semester hours of post-secondary education. Those hours are more than a standard 4-year bachelor’s degree, earned through an accredited college or university, typically 120 hours. One hundred twenty hours usually means earning a bachelor’s degree plus additional coursework, often through a master’s in accounting or MBA, or additional undergrad/grad credits.

Another requirement is completing specific coursework, which varies by state but ranges between 24 and 30 hours of accounting courses and 24 and 30 hours of business-related courses. Each state’s Board of Accountancy sets its rules and may be flexible or have precise breakdowns of which courses are acceptable. A CPA, board, or licensure will recognize a CPA, generally the American Institute of Certified Public Accountants (AICPA).

A CPA is authorized to practice only in the state where they are licensed, unless they obtain reciprocity in another state that recognizes their credentials.

What are the educational requirements for an EA?

The requirements for someone to become an Enrolled Agent (EA) are comparatively less rigorous than those of a CPA. There are no formal educational requirements; instead, it requires an individual to demonstrate tax expertise, primarily through passing an exam or having qualifying IRS experience.

Additionally, unlike a CPA needing to apply for reciprocity in the state that recognizes it, an EA is authorized to perform in all 50 states because they are certified by the IRS. So, there are two paths to becoming an EA, one is taking an IRS-acknowledged study course to pass a 3-part comprehensive exam administered by the IRS.

This exam is known as the Special Enrollment Examination (SEE). The first exam entails questions on Individual Taxation, the second exam consists of questions relating to Business Taxation, and the third exam relates to Representation, Practices, and Procedures. Each portion has 3.5 hours to complete the exam, 30 minutes to account for a tutorial and survey, and a 15-minute break.

The individual must pass each part with a scaled score of 105 or higher out of 130 and must pass all three parts within a maximum of 3 years. The exams can be taken up to 4 times in a testing window. Other additional requirements after passing the exam are applying with the IRS for enrollment, passing a background check, and a review of tax compliance.

The second path to becoming an EA is to have worked for the IRS for at least five consecutive years in a position that regularly interpreted and applied the tax code. This experience will allow someone to become eligible without having to take the SEE, pending approval by the IRS.

Are there continuing education Requirements?

Yes, for an EA and a CPA, the IRS must complete continuing education (CE) to maintain their status. The requirements for an EA are completing 72 hours of CE courses every 3 years, including at least 2 hours of ethics each year.

The CE must be taken from an IRS-approved provider, and the courses must relate to federal tax issues, ethics, or tax law updates. EAs must also renew their enrollment with the IRS every 3 years during the renewal cycle. Failure to do so will result in losing active status, and the SEE must be reapplied or retaken.

The IRS requires CPAs to complete continuing professional education (CPE) to maintain their licensure. Most states require 120 hours of CPE every 3 years, or an average of 40 hours per year. In many states, this includes 2-4 hours of ethics courses, and some states have requirements of completing a specific number of hours in accounting/auditing or taxation.

Failure to comply with these requirements will result in license suspension or revocation until they fulfill the required CPE. Some states may also impose late fees or fines for non-compliance.

What are the different services each performs?

CPAs aren’t just tax accountants representing you while filing taxes. They can represent you while facing audits, certifying financials, and in many other fashions. CPAs may help you with business valuations and risk assessments because they usually know about the certifications to apply.

With that said, if you need to understand these topics for your business or have large bonds where you need certified financials, a CPA will be your point of contact because they possess those authorized certifications to perform.

If you need more information regarding accredited financials and why they matter to a business owner, please read our blog with the link “What are Certified Financials and Why Do They Matter?”. Generally speaking, be aware that obtaining services from a CPA can be costly, and a genuine CPA could be hard to find.

An EA will typically have more updated knowledge due to the required CE to keep them current on tax laws. However, taxes are the extent to which they can provide services, depending on other factors. They won’t always be able to represent you in a tax audit, or their expertise may not be reliable in a court setting or a business valuation.

However, this is only because an EA does not possess the additional recognition to do so. Nevertheless, obtaining services from an EA will be more cost-effective if seeking a tax expert.

To summarize, both experts will provide you with services crucial to your business, and now you know how. Additionally, there is a site where you can verify the status of an enrolled agent. The site is accessible through the IRS.gov, and here is the link provided: “verify the status of an enrolled agent”.

To verify the status of a CPA, you may visit the state’s board of accountancy website. To get more in-depth information and assistance, contact us at Waterford Business Solutions. We have the team to assist you further in accounting and tax relations.