Published in Bluff Magazine
December 2007

Who do you trust to do your tax return? You may think it doesn’t matter but it really could come back to bite you. Did you know that someone can do your tax return completely wrong and that the ultimate person responsible is you? Even though you pay someone to prepare your taxes, the IRS will still come back on you if something is prepared wrong. It’s funny because you pay someone assuming that they will prepare your return correctly but if they totally mess it up, the IRS expects you to check what the preparer did!!

You hear so many terms for accountants – Certified Public Accountant (CPA), Enrolled Agent (EA), bookkeeper and of course, accountant. What does it all mean and how can it affect you? I’ll clarify this so that you may be more aware next tax season of who you are trusting.

A Certified Public Accountant, or CPA, is someone with a college degree geared toward taxes and many other aspects of accounting. After receiving a degree, and in many cases a masters degree, they take an exam called, what else, the CPA Exam. This is a grueling test that is taken in four parts that cover not only taxes but law, auditing, and other detailed areas of financial accounting. It is a very difficult test (costing about $200 per part) and the majority of people take the exam several times before passing all four parts of it. Even after obtaining your degree and passing the test, you have to work in the accounting industry, either public or private before becoming a CPA. The individual states regulate and govern CPA’s and each state has different rules in order to obtain a license to practice as a CPA. For example, in the State of Georgia, you have to work in either private industry under a CPA for 5 years (including 10,000 hours), or work under a CPA in a public accounting firm for 2 years (including 4,000 hours). You also have to document what type of work experience that you have obtained when filling out your application to become a CPA. Then, the state licensing board gets to decide if your experience is in enough areas of accounting to grant you the license. It doesn’t stop there. After you receive your license, you are required to keep learning by taking continuing education courses. In Georgia, you are required to take 80 hours of classes every two years and you have to prove that you have taken these courses or the State will not renew your license to practice. The courses cost about $200 per eight hours. If you think hiring a CPA is expensive, remember the old rule of thumb – you get what you pay for.

Now on to an Enrolled Agent or EA. An EA is a person that the IRS designates, not the State. The right to practice comes from the Federal government, specifically the Department of Treasury (IRS). In order to become an EA, you do not have to have any educational requirements. This means that you do not even have to have a high school diploma! All you have to do is either pass a test administered by the IRS or work for the IRS in an area of tax/auditing for 5 years. I have heard it is a difficult test - instead of focusing on all areas of accounting, it focuses on the tax code. An EA has to keep up continuing education just like a CPA but they are only required to have 72 hours every three years.

I’m truly do not want hate mail from Enrolled Agents, and am sure there are EA’s with as much or more knowledge than CPA’s but as you can see, there is a big difference between a CPA and an EA. Also, I have to emphasize that since EA’s have their designation from the IRS, it may not be as much of advantage having them do your taxes. The EA’s that have worked for the IRS may take a more conservative stance on your situation and may not be so aggressive in newer areas such as gambing/gaming.

People that call themselves tax preparers, bookkeepers and/or accountants usually are not formally educated. Most likely they did not go to college or if they did, did not finish along the path of formal training, such as having to pass a test of knowledge. They may have only taken some tax courses in a specific area, such as individual income taxes. Accountants or bookkeepers are not allowed to defend you against the IRS. They cannot obtain a Power of Attorney to represent you. They have to fill out a Form called a Tax Authorization Form which only allows them to inspect and /or receive confidential information on your behalf.

Lastly, be careful of the guys that are in a costume waving on the streetcorner during tax season. You know the ones - they promise fast refunds and do a “while you wait” tax return. These are the dangerous ones and the person that you trust to prepare your return correctly may be a bored housewife that took a twelve week course and is now feeling qualified to do your return! Try to find that person in three years if you get a notice from the IRS that your tax return is wrong.

Ok, now I have made EA’s, accountants/bookkeepers and a couple of housewives mad at me. Because I am obviously a bit prejudiced to CPA’s, I have to point out that it all boils down to hiring the person that you feel the most comfortable with. It’s best to find someone that is familiar with your type of tax situation, as they will know the special ins and outs in your situation.

Make sure your taxes are filed and enjoy the rest of the year!


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