You may have heard of an EA or the AFSP, but what is the difference between the two? Let’s take a deeper look at what exactly each of these titles mean and the differences between the two.
An enrolled agent (EA) is a federally-authorized tax preparer who has technical expertise in the field of taxation and is empowered by the U.S. Department of the Treasury to represent taxpayers before all administrative levels of the Internal Revenue Service. In addition to taxpayer representation, enrolled agents often provide tax consultation services and prepare a wide range of federal and state tax returns.
Why Do We Have EAs?
The position of an EA was first created after the Civil War when many citizens had problems setting claims with the government for property that was confiscated and used in the war. So, Congress decided in 1884 to entrust Enrolled Agents with the power of advocacy to prepare claims against the governments and seek equitable justice for the citizenry.
EA’s duties changed over the years as new tax laws were passed. In 1913, when the income tax law passed, the role of the Enrolled Agent increased to include the preparation of the many tax forms that were required for complex tax collections. Today, since audits are more prevalent, EA’s roles have evolved into taxpayer advocacy, such as negotiating with the IRS on behalf of clients.
How Do You Become an EA?
You can become an EA in one of two ways: work for the IRS for five years interpreting tax code or pass all three parts of the EA Exam (also known as the SEE Exam). No matter which path you choose, you must also pass an IRS background check.
The test that EAs must pass to earn the credential is based on an interpretation of tax law. This exam is very different than the notorious CPA exam, since there is a focus on how tax obligations are presented in financial statements instead of how the taxes are calculated. It’s also required for EAs to meet a continued education requirement in order to maintain their active status.
Duties of an EA
An EA is specifically authorized to represent taxpayers before the IRS at every administrative level up to, but not including, Tax Court. The majority of Enrolled Agents run accounting practices and must compete with CPAs, bookkeepers, and other accountants.
EAs have unlimited practice rights and are unrestricted with regard to which taxpayer they represent. Click To Tweet
Unlike their competitors, EAs have a federal designation that allow for them to work across state borders. CPAs and attorneys have to meet reciprocity requirements of the state in which they wish to practice. EAs have unlimited practice rights and are unrestricted with regard to which taxpayer they represent, what types of tax matters they handle, and which IRS offices they can represent clients before.
Annual Filing Season Program (AFSP)
The Annual Filing Season Program is a relatively new voluntary program offered by the IRS and is administered through IRS-approved continuing education providers. The AFSP is available to all tax professionals.
Why the AFSP Exists
The AFSP was created to replace the former Registered Tax Return Preparer (RTRP) program. The Annual Filing Season Program is voluntary, unlike the RTRP. The goal was to have a new program that is generally less difficult and costly for tax preparers.
The AFSP is intended to help weed out the incompetent professionals among the tax industry Click To Tweet
This new program is used to distinguish tax professionals who meet minimum requirements of proficiency in the tax system. Without exceeding the scope of the IRS’s authority, the AFSP is intended to help weed out the incompetent professionals among the tax industry.
Why Enroll in the AFSP
There are three main benefits you can receive from the AFSP credential. The first is that your inclusion in a public database that lists all PTIN holders with certifications and professional designations related to the tax preparation industry. You will be included with many other respected designations that are found in the database, such as CPAs and attorneys.
Secondly, if you are a tax preparer who completes the AFSP, you will be able to represent clients before the IRS in matters related to professional tax returns. This was once a right all tax preparers had, but since 2016, the IRS awards this privilege to tax preparers who have the AFSP. Other credentials, like the EA title, have unlimited rights without the AFSP.
The last and most obvious benefit from the Annual Filing Season Program is an official designation instituted by the IRS. This is similar to how EAs and CPAs prove to their clients that they have successfully obtained a designation that the IRS deems fit to handle tax preparations on behalf of citizens.
How to Complete the AFSP
Obtaining an AFSP credential is a much simpler process than the previous RTRP designation. Instead of taking an exam on-location at a Prometric testing center, non-exempt tax professionals obtaining the AFSP credential must complete an Annual Federal Tax Filing Season Refresher (AFTR) course and an associated timed exam, which can all be done through an IRS-approved course provider.
Once you fulfill all of the continuing education requirements, you will be able to download/print your record of completion from the IRS. The AFSP record of completion is valid for the upcoming filing year and in order to update your AFSP, you must meet the continuing education requirements every year.
The Bottom Line
An EA is a credentialed tax return preparer that can represent anyone before the IRS. The Annual Filing Season Program (AFSP) is a voluntary program designed to encourage tax return preparers to participate in continuing education (CE) courses.
If you plan on pursuing a career as an EA, make sure you arm yourself with a strong review course. Good luck!
Amy is a professional finance and accounting writer who has a passion for all things data driven. When this San Diego local isn’t writing, she can be found walking her dogs by the beach or sailing on a sunny day in the bay.
Favorite Quote: “The only time I set the bar low is for limbo.” -Michael Scott