Enrolled Agent vs. CPA vs. Tax Attorney

By February 1, 2017IRS Audit, Tax Debt
Picture of chairs representing enrolled agents vs cpas vs tax attorneys

The Different Types of Professional Help

Selecting the right tax professional to help with your tax problems is no different than picking a dentist, plumber, or mechanic. You want to make sure they are competent, trustworthy, and charge a reasonable rate.

As you probably already know, there are many different kinds of tax professionals out there who will gladly offer to help you settle your tax problems. These include enrolled agents, CPAs, or tax attorneys. However, do you know the difference between these tax professionals and which one is best for your particular case? If not, you aren’t alone. There is a lot of confusion in the general public about tax professionals and why someone would chose one over the other when they have a tax problem.

In this article, we’ll give you some insight into the differences between Enrolled Agents, CPAs, and Tax Attorneys so that you can make an informed decision on what kind of tax professional you want to handle your case.

Enrolled Agents

An enrolled agent is a person who is licensed to represent taxpayers before the IRS after passing a proficiency exam or working as a former IRS employee. Compared to CPAs and Tax Attorneys, enrolled agents will generally charge less for their services. To the unsuspecting client with limited funds available, this might seem like an attractive option. However, there is a reason they charge less. Enrolled Agents are the least educated of the tax professionals and have the lowest requirements for certification. They are not required to have e a college degree or any other specific tax related education.

Here’s an illustration that might be applicable: One day, a man walked down the street looking for a barber. On the corner he found a barber shop that advertised $5 haircuts. There was a line out the door and a dozen or so barbers inside, all busily cutting hair. Next door, there was another barber shop that was equally as busy. This barbershop had a sign outside that read “We fix $5 haircuts for $15.”

Now, we don’t want to completely pick on enrolled agents. After all, there were more than a few satisfied customers at the $5 barbershop and not all of the barbers there were bad (we assume). The point is that Enrolled Agents are an excellent choice and can save you from paying the extra cost an attorney or CPA, but only under the right circumstances. That is, if your haircut is simple, then all you need is $5 haircut. There’s no point in overspending. But if your haircut needs a more skilled and experienced barber, you should be willing to pay more. The same thing goes for settling your tax debt. We’ve done more than our share of clean up jobs where the client started with an enrolled agent and only later realized that the agent was not equipped to handle the complexity of their case. If you are confronted with the choice of hiring an Enrolled Agent to save money or an Attorney/CPA that will cost more, we recommend the latter in most cases.

Best for: Tax preparation, miscellaneous tax filings, and other routine matters

CPAs

“Certified Public Accountants” are accountants who have a degree in accounting, at least two years of work experience, and have passed the CPA exam. This is not an easy thing to do, so most CPAs are smart and capable professionals.

However, it might surprise you to learn that most CPAs do not actually specialize in taxation. The vast majority of CPAs only work on tax matters for three or four months out of the year, spending the rest of the time on other accounting services. And even then, their time is spent on tax preparation, with tax resolution making up only a fraction of their focus and experience. Also, CPAs are not trained to be represent someone in an adversarial proceeding, such as negotiating a tax settlement with the IRS. This means that you should exercise care when considering a CPA for your tax debt relief needs. The Offer in Compromise process, for example, is complex and often contentious, so we do not recommend leaving it to someone who handles tax disputes on an irregular basis and is not trained on how to argue on someone else’s behalf.

Best for: Complex tax return preparation

Tax Attorneys

Tax attorneys are lawyers who specialize in tax law. As attorneys, they are uniquely qualified with knowledge of the tax law, as well as the training that lawyers receive on representing clients in adversarial proceedings – which includes negotiations with the IRS. The best tax attorneys have a Masters of Law in Taxation, which is the highest educational degree available for tax law, but not all have one of these advanced degrees.

As you can probably imagine, there are many different types of tax attorneys. Some specialize in corporate tax, other’s focus exclusively on partnership taxation, while still other’s work only with trusts and estates. So, it’s important to make sure you hire a tax attorney with a practice specializing in tax controversy. Ideally, this attorney will have a practice dedicated exclusively to tax controversy, but this is not a strict requirement. As long as a significant portion of the practice involves tax controversy, the attorney is probably a good choice for resolving your tax debt or other tax problem.

Best for: Tax controversy matters and representing clients in IRS proceedings.

The Bottom Line

Hire the right tax professional for your needs. If you need a tax attorney, don’t skimp and hire an enrolled agent. And visa-versa.