With the probable demise of the IRS’s initiative to create Registered Tax Return Preparers (RTRPs), the alphabet soup of tax professionals is now down to EAs, CPAs, CTECs, and JDs. While Robert Flach argues that RTRPs should be resurrected as a voluntary designation, I doubt that will happen (and I don’t see a benefit from it). Before I respond to his post and an excellent post by Jason Dinesen (an EA in Iowa), here’s my thoughts on the designations.
I’m an Enrolled Agent (EA). Enrolled Agents are one of three professions with full rights to practice before the IRS (the other professions are CPAs and attorneys (JDs)). To become an Enrolled Agent, you must pass a difficult three-part exam or have worked for the IRS for a number of years in a variety of assignments (I passed the exam back when it was a four-part exam). EAs specialize in tax; the slogan “We SpEAk Tax” is on my business card because that’s truly what we specialize in.
The public associates Certified Public Accountants (CPAs) as the tax professionals; however, that’s not really the case. While many CPAs do specialize in tax (such as Joe Kristan), many others work in accounting, audit, and consulting. CPAs are licensed by each state (EAs are licensed by the federal government). The CPA exam is not a tax exam. While EAs must take continuing education that is tax related, CPAs must take continuing education that is accounting related (but not necessarily tax related).
The other enrolled preparers are attorneys (JDs). Few of the attorneys who specialize in tax actually prepare many returns; for the most part, they deal with representation issues that may end up in Tax Court.
The majority of tax professionals are unenrolled preparers. They’re not licensed as CPAs, EAs, or attorneys. Most states don’t require tax professionals to have licenses (only California, Oregon, Maryland, and New York require licenses). In California, all tax professionals must have a license; if a tax professional is not a CPA, EA, or attorney, they must obtain a license from the California Tax Education Council (CTEC). CTEC professionals must take continuing education each year, too. However, a tax professional in, say, Iowa need only print business cards and he or she can compete against CPAs, EAs, and attorneys.
There are far more unenrolled preparers than enrolled preparers. Among enrolled preparers there are far more CPAs than EAs. There are 48,000 practicing Enrolled Agents, 225,000 CPAs, and 350,000 or so unenrolled preparers. The fact that someone has a designation of any sort doesn’t necessarily mean anything. My business is almost all referral-based; this is my fourteenth tax season and my advertising expense consists of this blog. If my designation were MTP (Martian Tax Professional) I doubt my preparation clients would care. (It would have an impact on representation, but that’s another story for another day.)
Jason Dinesen noted that his state organization, the Iowa Association of Enrolled Agents, has been decimated by the IRS’s new rules on continuing education. A little over a year ago, the IRS mandated that continuing education providers pre-approve continuing education courses with the IRS. While the California Society of Enrolled Agents (CSEA) and the Nevada Society of Enrolled Agents (NVSEA) have not had problems dealing with this, some state organizations have had problems; apparently, Iowa is one of those states. It is unclear if the new rules on continuing education will survive last week’s court ruling. The IRS has not publicly commented on the ruling (though the decision was announced late Friday and the IRS was closed yesterday for the MLK holiday). I do expect the IRS to appeal the ruling.
Enrolled Agents have a done a miserable job of promoting themselves. While I’m hopeful my new book will help with some publicity, the reality is that if I tell the average cab driver that I’m an Enrolled Agent, the response I’ll get is, “You don’t look like you’re in law enforcement.” Sigh….
My brother turned me on to books by Jack Ries and Al Trout such as Positioning: The Battle for Your Mind. Like it or not, CPAs have won the positioning war with tax preparation; Enrolled Agents aren’t going to win that battle. Perhaps we can win the battle for representation but I doubt it. Overall, the Enrolled Agent profession and the National Society of Enrolled Agents are not good marketers. Banging our head against the brick wall that CPAs own (to the public, CPA equals tax professional) is a waste of time.
So where am I going with this? This post was more of a stream of consciousness than anything specific. I’d love to see the EA designation in its right place in the forefront of the tax world; the reality is that it’s not going to happen in my lifetime. Jason Dinesen notes that the EA designation has been marginalized. Perhaps EAs should make the most of it. I remember a company called Curtis Mathes that promoted themselves as the most expensive television sets made. (The company began to decline in the 1980s after the death of its chairman in an airplane accident.) I wouldn’t mind being labeled as the “Rolls Royce of tax preparation.”