EA vs CPA, which one is better? You’re probably trying to file your tax return and don’y want to go it alone. For this reason, you’ve reached out to a few people but aren’t sure who’s most qualified to do the job. So which is it? EA or CPA?
The answer isn’t as binary as you may think. Not all CPAs do taxes but not all EAs are capable of handling your taxes. This article will help you decide not only what professional tax preparer you need but also how to test if the tax professional you pick is competent.
What is an EA?
According to the IRS, Enrolled Agent (EA) status is the highest credential the IRS awards. EAs have unlimited practice rights like attorneys and certified public accountants (CPAs). This means an EA is unrestricted when it comes to which clients they can represent, what types of tax matters they can engage, and which IRS offices they can represent clients before.
Does this mean that the EA designation is above the CPA designation? No! The IRS awards EA status while each state’s board of accountancy issues CPA licenses. Accordingly, each governing body will have its own set of requirements.
To better assess which credential carries more weight we will look at the process of obtaining EA status vs a CPA license.
How Do You Become an EA?
Becoming an EA requires a 5 step process:
- Obtain a Preparer Tax Identification Number;
- Apply to take the Special Enrollment Examination (SEE);
- Achieve passing scores on all 3 parts of the SEE;
- Apply for enrollment; and
- Pass a suitability check, which will include tax compliance to ensure that you have filed all necessary tax returns and there are no outstanding tax liabilities; and criminal background.
The IRS does not require applicants to have an accounting degree, or any degree for that matter, to become an enrolled agent.
How Hard is the EA Exam?
The EA exam, or more commonly known as the SEE, is a three part test:
Each part of the SEE contains 100 questions with each part lasting roughly 4 hours. Its recommended to study between 40-70 hours to be ready for each exam part.
The national pass rate for the SEE is 70%, making it one of the easier tax credential exams to pass. According to the IRS, as of September 2022, there are 63,013 active enrolled agents.
Do EAs Have Any Continuing Education Requirements?
EAs must obtain a minimum of 72 hours per every three years with a minimum requirement of 16 hours per year.
What is a CPA?
A Certified Public Accountant (CPA) is an accounting professional who has met state licensing requirements. Because the CPA is awarded by each state board of accountancy, the requirements to become a CPA differ for each state. However, most states require extensive requirements.
How Do You Become a CPA?
The path to become a CPA is a long and expensive process. The process between becoming a EA vs CPA is different. Although the requirements are on a state by state basis, to become a CPA a candidate will need to complete the following requirements:
- 120-150 semester hours of college level education covering each of the following
- Financial accounting,
- Cost or management accounting,
- Taxation, and
- Audit and attestation.
- Work experience under the supervision of a CPA, and
- Pass all 4 parts of the CPA exam within 18 months.
How Hard is the CPA Exam?
- Auditing and Attestation (AUD),
- Business Environment and Concepts (BEC),
- Financial Accounting and Reporting (FAR),
- and Regulation (REG).
Each section of the exam is 4 hours meaning a candidate will need to complete 16 hours of testing. The AICPA recommends between 300-400 hours of study time for candidates to pass all 4 sections. Although the process is extensive, many accounting professionals choose to become a CPA over an EA.
The National Association of State Board of Accountancy (NASBA) estimates that there are 665,612 actively licensed CPAs as of August 24, 2022. Comparing an EA vs a CPA, there are 10 times more CPAs than EAs.
Do CPAs Have Any Continuing Education Requirements?
Although the requirements differ by state, CPAs generally need 40 hours of CPE per year. Over a 3 year period a CPA is required to have 120 hours of CPE.
EA vs CPA
So which is it, EA vs CPA? Well, the CPA is by far the more prestigious credential. A CPA license is more difficult to obtain, requires more education, has a more difficult exam and requires more continuing education. Additionally, CPAs earn more than their EA counterparts with a similar level of experience.
However, does a CPA license make you a better tax accountant? Not necessarily. Some CPAs don’t specialize in tax and many CPAs don’t even work in public accounting. Many CPAs go on to be CFOs of fortune 500 companies or even start their own business.
Although not all CPAs prepare taxes, this does not diminish the expertise of a tax specialist who is a CPA. There is a misconception that all CPAs do is “account” for the numbers that go into a return but that is not true. CPAs that specialize in tax offer services such as advance tax planning, trust and estate planning, and financial planning.
Likewise, an EA that specializes in tax may offer these same services. However, an EA may not provide financial statements services like issuing audited financial statements. In short, CPAs can do everything an EA can do but an EA can’t do everything a CPA can do.
How to Pick The Right Tax Advisor?
If you have to pick an EA vs CPA make sure you’re picking the right advisor. Someone’s designation does not mean they are a qualified to do the job. You should always ask important questions like:
- What types of returns do you prepare? Individuals/Business returns?
- How many years of experience do you have?
- What industries do you focus on?
- Do you deal with clients like me?
- What services do you offer besides tax prep?