Become an Enrolled Agent – Careers and Outlook

Trusts and estates are often structured to limit tax law exposure. Ultimately, the best interests of the beneficiary must be attended to. As an EA, you should be able to assess the trustor/trustee relationship and assure that the final beneficiary receives the maximum benefit from the trust or estate.

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If you wish to specialize in this sort of taxation, you will need to be familiar with certain terms and concepts that include, but are not limited to:

There are organizations that are not required to pay income taxes. However, they must still comply with certain rules and regulations to attain, and maintain, that status. For the most part, these are 501(c)(3) organizations, commonly known as nonprofit organizations. These might include churches and charities. They can take on many different forms, including charitable trust accounts, and complex corporate structures that perform many different sorts of tasks and receive funds from many sources.

It's important to know the difference between non-profits and federally exempt organizations. A non-profit is established at the state level only. Such an organization might be free from state income taxes, property taxes, or other state-levied fees. To incorporate a non-profit, an individual or organization only needs to apply for enrollment with their Secretary of State and receive permission to operate in this manner.

A federally exempt organization, on the other hand, is often a non-profit that has applied for federal tax exemption. They operate under the 501(c)(3) status of the Internal Revenue Service code. As an EA, you might specialize in this sort of tax status.

Exempt organizations often rely on donations to keep afloat. These donations must be accounted for in the companies financial information. Many donors will want to receive tax vouchers for their donations, since they will expect to deduct these from their tax payments. Other organizations might receive funds in return for services or goods provided. As an EA, you will be expected to use required information to show how these payments comply with IRS codes so that your client can maintain its exempt status.

If you represent an exempt organization, you will need to know about the following forms:

Some businesses provide ways for their employees to save for their retirement. These accounts may include instruments such as a 401(k) investment plan or some sorts of IRA savings plan. These plans offer limited tax incentives and, as such, have many requirements and restrictions that govern both the employees’ and business entities contributions.

When you are a licensed EA, you must have a mastery over the following:

Farmers have special status with the IRS. All EAs will be tested on this area of taxation during the licensing process. Farmers are considered people or organizations that grow field crops, maintain orchards or vineyards, or who raise cattle or other livestock. You should be particularly interested if you live in a rural, agrarian area. Even if you are not in a rural area, you might find small-scale farms in urban or suburban areas. These farmers will need help with their tax issues and being versed in this area will provide another level of job security.

If you have farmer clients, you must know about the various subsidies, deductions, and incentives the IRS makes available to them.

The IRS code applies to, but is not limited to, the following:

EAs may also be involved in the formation of new corporations. After all, a corporation is formed as a result of its underlying tax structure. You must know how to assess the profit/loss statements from your corporate client and understand all the applicable deductions it can take from taxable income each tax season. You will need to know all the filing requirements for corporations, as well as how they are created and funded.

Your EA exam, and practice will require that you study and have a comprehensive knowledge of the following:

Corporations are legal entities that protect their owners from liability. Board members and shareholders can reap the rewards of profit while being shielded from any debts incurred by the organization.

To pass all the EA special exam, you must have intimate knowledge of IRS Publication 542, including these relevant topics:

As an EA, you will enjoy client confidentiality in certain circumstances. These are limited to audits and IRS collections. For tax preparation filings, your communications may be subject to public scrutiny or be part of the discovery process, if you or your client is named in a lawsuit.

You are responsible for performing due diligence in all matters. You should verify that all facts and statements you receive from oral or written communication is true and valid. When you are working with a client on any sort of matter, you should inform them that they must not omit any details pertinent to their tax filling, audit, or collections process.

EAs are also responsible for avoiding conflicts of interest. For that reason, you should not work with family members or friends, if that relationship impugns your ability to perform your lawfully sanctioned duties. When you take on a client, you should perform diligence to ensure that your work for them will not harm another current, or former, client.

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The U.S. Tax Court is a special court wherein your client can appeal an IRS tax law decision. While normally, only a member of the US Bar association, an attorney, can represent a client in court, this court allows EAs to represent their clients. However, you will need to become a USTC Practitioner. The USTC Practitioner's Service administers an exam every two years. If you pass all parts of the exam, you can represent your clients in this court.

The test covers the following knowledge areas:

Before you sit for the EA exam, you should know that the test has a 5-10 percent pass rate.

The steps to becoming an EA are relatively simple. According to the IRS, they are:

To obtain a PTIN, you must create an account with the IRS. This will include previous tax returns, personal identification information, pass a suitability check and contact information. Once your information is submitted, you can apply for a PTIN. You will need to account for any past legal or taxation troubles. Once all of your information is accepted, you will receive your PTIN.

Taking the SEE is not quite as straightforward or easy. The pass rate for all three parts of the exam is somewhere around 33 percent.

The enrolled agents examination covers three areas with 100 questions covering these general areas:

The IRS will allow anyone to apply to take the examination, and there are no educational requirements. However, it's advised that you have significant experience with taxation, tax prep and tax returns. You will also be subject to a background check and your application may be denied if your background does not instill confidence in the IRS. These are the steps you will need to accomplish to becoming an enrolled agent.

Once you are accepted to take the SEE, you can contact your nearest Prometric testing center to schedule convenient test times. They schedule times for the EA exam between May and February. If you do not pass one part of the test, you must wait to schedule a re-take until the next testing period begins. After you pass one part of the test, you will have two years to pass the remaining two sections.

To maintain your EA license, you are required to take 72 hours of Continuing Professional Education credits every three years, including 16 hours per year minimum. The IRS must approve your education provider. The IRS.gov website provides a link to an abbreviated list of approved CPE providers. You might use one of those or attend appropriate courses at your local accredited college or university. Professional organizations or associations may also be recognized as valid CPE providers. To ensure that your credits will count towards your CPE hours, look for the IRS Approved Continuing Education Provider logo.

You should make sure that you keep accurate and complete records of your CPE hours. You must also pay all renewal fees for both your EA licensure and your PTIN.