Here's a question most people never think to ask: is the person preparing your tax return actually credentialed to do so? Because in most states, including California, the answer might be "not really." There is no blanket federal requirement to hold a license or pass an exam to prepare tax returns for compensation. Anyone can hang a shingle. That's a problem — and it's the reason the Enrolled Agent credential exists.

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The Credential, Explained

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An Enrolled Agent is a tax professional who has earned the right to represent taxpayers before the Internal Revenue Service. It's a federal credential — granted by the IRS itself, not by a state board. That makes it unique. It's also the only taxpayer representative credential issued directly by the federal government.

The "enrolled" part refers to being enrolled to practice before the IRS. An EA can represent any taxpayer, on any tax matter, before any IRS office. That's the same scope of authority granted to attorneys and CPAs in tax matters. The difference is that an EA's entire professional focus is taxation. That's the discipline they were tested on, and it's where they spend their continuing education hours.

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What It Takes to Become One

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There are two paths to the credential. The more common one is passing the Special Enrollment Examination — a three-part test covering individual taxation, business taxation, and representation, practices, and procedures. It's administered by Prometric and it's not easy. The exam is comprehensive, covering everything from basis calculations and entity taxation to IRS collection procedures and ethics requirements. Pass rates for individual parts typically hover around 60% to 70%.

The second path is through prior IRS experience — specifically, having worked at the IRS for at least five consecutive years in a position that regularly interpreted and applied the tax code. This route is less common but produces EAs with deep institutional knowledge of how the IRS actually operates.

Once credentialed, Enrolled Agents are required to complete 72 hours of continuing education every three years — an average of 24 hours per year. This isn't optional padding. The tax code changes constantly, and the CE requirement ensures that EAs stay current. For context, the Tax Cuts and Jobs Act of 2017 alone overhauled individual rates, entity taxation, depreciation rules, the SALT cap, the pass-through deduction, and dozens of other provisions. An EA who isn't keeping up with changes like that isn't doing the job.

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Why Representation Matters More Than You Think

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Most people choose a tax preparer based on price, convenience, or a referral. They're thinking about the return — getting it filed, getting the refund. What they're not thinking about is what happens if something goes wrong.

If you receive a notice from the IRS, get selected for an audit, need to negotiate a payment plan, or want to submit an offer in compromise, you need someone who can represent you. Not someone who can explain what the letter says. Someone who can pick up the phone, call the IRS on your behalf, and handle it.

Most tax preparers cannot do this. Under the IRS's tiered system, only Enrolled Agents, CPAs, and attorneys have unlimited representation rights. Preparers who hold only a PTIN — which is the minimum requirement to prepare returns for compensation — have limited rights. They can represent clients only for returns they personally prepared, and only during the examination phase. They cannot represent you in collections, appeals, or before the Taxpayer Advocate. Once the situation escalates beyond a basic exam inquiry, they're out.

An Annual Filing Season Program participant has slightly broader rights, but still not unlimited. The EA credential is the threshold for full representation authority without a law degree or CPA license.

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EA vs. CPA — What's the Difference?

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This comes up a lot, and it's a fair question. Both can prepare returns. Both can represent you before the IRS. Both are subject to ethical standards. So what's different?

Scope. A CPA is a state-licensed professional whose credential covers accounting, auditing, financial reporting, and tax. CPAs take a four-part exam — the Uniform CPA Exam — that tests across all of these areas. Tax is one component. Some CPAs specialize in tax. Many do not. A CPA working primarily in audit or forensic accounting may not have prepared an individual return in years.

An Enrolled Agent, by contrast, specializes exclusively in taxation. The exam is tax-specific. The continuing education is tax-specific. The practice is tax-specific. If your primary need is accurate, thorough tax preparation and planning — rather than audited financial statements or management accounting — an EA is often the more directly relevant professional.

That doesn't mean one is better than the other across the board. It means the right choice depends on what you need. If you need a compiled financial statement for a lender, you need a CPA. If you need someone to handle a complex multi-state return with rental properties, business income, and an IRS installment agreement, an EA is built for that.

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Circular 230 and Accountability

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Enrolled Agents are governed by Treasury Department Circular 230 — the federal regulations that control practice before the IRS. These rules impose specific duties including competence, diligence, accuracy, and confidentiality. They also prohibit conflicts of interest, frivolous positions, and certain fee arrangements.

Violations of Circular 230 can result in censure, suspension, or permanent disbarment from practice before the IRS. This isn't theoretical — the Office of Professional Responsibility actively investigates and sanctions practitioners who violate these standards. It's a regulatory framework with real enforcement, and it creates a layer of accountability that doesn't exist for unregulated preparers.

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What This Means for You

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You probably don't think about your tax preparer's credentials until you need them to matter. An audit notice shows up. A balance due letter arrives that doesn't look right. Your ex-spouse filed a return claiming your kids as dependents. These are the moments when the difference between a credentialed practitioner and an uncredentialed preparer becomes very concrete.

Choosing someone based on who's cheapest or who has an office closest to your house is understandable. But knowing what credentials stand behind the person signing your return is worth the extra ten minutes of research. An Enrolled Agent has been tested, is federally licensed, is required to stay current, and can represent you fully if the IRS comes calling.

At San Diego Tax Associates, our Enrolled Agents bring decades of focused tax experience to every engagement. Whether your situation is straightforward or complex, we have the credentials and the authority to handle it — from preparation through representation.

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