The Differences Between Tax Attorneys, CPAs, and IRS Enrolled Agents

team of tax professionals

With tax season usually being a challenging time for most businesses and individuals, you definitely need all the help you can get, whether you have let years of tax debt add up or are about to file complex taxes for the first time. Irrespective of your tax case, it is paramount to entrust the right tax professional, especially if you are called to cope with tax debt. 

Fortunately, in this “battle”, you are not alone. In fact, you have plenty of options, with the most popular ones being tax attorneys, certified public accountants (CPAs), and enrolled agents. Although they all help taxpayers, each has a different role. The status of your case with the IRS (Internal Revenue Service), as well as your unique goals and needs, will determine which tax expert you need to partner with. Read on to figure everything out so you can make the most informed decision. 


What Is a Tax Attorney and What Do They Do?

A tax attorney is a legal professional that has passed the state bar exam. They are law degree holders and specialize in tax law. Therefore, a tax attorney is the better choice if you are in trouble with tax authorities (i.e., you face levies or tax liens or owe thousands in back taxes) and need to deal with the legal aspect of tax preparation

A tax attorney will represent your best interest in IRS communication, pretty much in the same way a CPA (Certified Public Accountant) and Enrolled Agent (EA) will. However, tax attorneys have undergone many years of training and education in fields like dispute resolution and tax controversy, and know not only how to represent their clients during IRS proceedings, but also how to go up against the IRS when adverse tax actions take place. Plus, they are uniquely equipped to undo property liens, halt wage garnishments, come up with compromises with the IRS, help with unfiled returns, settle back taxes, and handle all legal tax matters you might be dealing with. 

Note: It is best to find a tax attorney that specializes in the specific type of tax help you need (i.e., tax attorneys with expert knowledge on estates and trusts). 

 

What Is a CPA and What Do They Do?

A Certified Public Accountant (CPA) has:

(1) 150+ hours of education, 

(2) a 5-year business degree, and 

(3) passed the intensive CPA exam.*

* The CPA exam consists of four sections (1) Regulation, (2) Financial Accounting & Reporting, (3) Business Environment and Concepts, and (4) Auditing & Attestation), totaling 1,000 questions. 

CPAs are more experienced and knowledgeable in tax preparation rather than a tax professional you would see for simple things. So, a CPA makes a good fit if your tax situation is complicated (i.e., you have high net worth investments, have children, are divorced, and own a business). Allowing a CPA to prepare your taxes, in such cases, is probably the best course of action you can take, especially if you have a lot of money coming in and out. Also, tasks like undergoing audits, creating a financial plan, and paying quarterly taxes are easier with a CPA, who can:

  • Assist you with monthly and yearly accounting services. 
  • Come up with a long-term tax plan.
  • Help you carry it through. 

At the end of the day, a CPA will make the tax process simpler for you year after year, especially if you develop an ongoing relationship with one.

Let’s also note that a CPA is required to complete 120+ hours of continuing education every three years while the average tax preparation professional has undergone between 60-80 hours of training. Plus, CPAs know how to comply with the federal laws and still maximize benefits while minimizing your tax liability. 

 

What Is an IRS Enrolled Agent and What Do They Do?

An IRS Enrolled Agent (EA) is a tax professional that can help you with your personal and business tax returns, except for Tax Court, where you need a tax attorney to represent you before the IRS.   A registered agent knows the ins and outs of the IRS because they are required to have worked for the IRS for a minimum of 5 years.

An enrolled agent’s role is pretty similar to tax attorneys and CPAs. Back in 1913, the responsibilities of an Enrolled Agent included claims for monetary relief for taxpayers with inequitable taxes. Over the years, the sources of tax collections (i.e., gift, estate tax, income tax, etc.) became even more complex, which gave additional duties to EAs, including tax preparation and taxpayer advocacy. 

Given that an IRS enrolled agent’s enrollment is a federal designation, Enrolled Agents have the right to work across state borders – something that tax attorneys and CPAs cannot do without meeting the desired state’s reciprocity requirements. 

To become an IRS Enrolled Agent, one needs to pass a 3-part comprehensive IRS test* that covers business and individual tax returns. This test is significantly different from the one CPAs sit, as it is on tax law. On the other hand, the CPA exam is almost exclusively on auditing procedures and rules, as well as accounting and designed to make the interpretation of financial statements easier. This interpretation, though, does not refer to how taxes are calculated rather than how to present tax obligations in the financial statement.  

Nevertheless, prior experience as an IRS employee can also earn them Enrolled Agent status. Once they become classified as IRS Enrolled Agents, they need to complete 72 hours of a continuing education course every 36 months. Finally, all IRS Enrolled Agent candidates are subject to being thrown out (disbarred) from practice before the IRS if they have been found to perform illegal acts. For that reason, background checks are performed on Enrolled Agents on a regular basis. An Enrolled Agent can also be removed from their duties if they fail to meet the continuing education requirements. 

Note: IRS Enrolled Agents cannot perform all kinds of audits. According to regulations, they are not allowed to express an unqualified type of opinion (i.e., when a public company files their financial statements with the SEC – Securities & Exchange Commission). Also, EAs are not required to have prior knowledge of tax preparation. It is up to them if they will be preparing tax returns or not. 

*An EAs exam consists of (1) Tax Code for Individuals, (2) Tax Code for Businesses, and (3) Representation, Practice and Procedures (100 questions each).  

 

What’s the Difference Between a Tax Attorney, a CPA, and an Enrolled Agent?

As already mentioned above:

  • Certified Public Accountants (CPAs) are accounting experts, with one of their specialties being tax matters. They are fully capable of doing basic tax returns, provided no extensive legal analysis is required. 
  • Enrolled Agents (EAs) are particularly skilled tax practitioners authorized by the federal government and empowered to represent their clients before the IRS. They can handle tax audits, tax appeals, tax collections, and relevant matters, and are a great option for basic W2 tax preparation. 
  • Tax Attorneys are law specialists who can represent in court (but not always deal with the IRS). They are the best choice if you need assistance with complex tax-related matters (i.e., you are being audited or receive an IRS notice). 

All in all, your particular tax matter will help determine whether it would be best to hire a tax attorney, enrolled agent, or a certified public accountant. 

Seek the assistance of a CPA if:

  • You are called to figure your way through minimizing your tax liability while dealing with complex business or personal taxes. 
  • Need basic tax preparation. 
  • Want to be represented for a state or federal issue in any of the 50 states (for IRS representation and tax resolution). 
  • Want a qualified tax professional to handle highly complex financial statements.
  • Wish to get your audited financial statements and accounts in order. 
  • You are NOT focused purely on taxes. 

Seek the assistance of a tax attorney if:

  • You are involved in a tax controversy issue or are receiving debt collection notices or are, in any way, in trouble with the IRS.
  • You are a breath away from receiving a levy on your wages or bank accounts. You should be able to know this if your case has been assigned a revenue officer by the IRS. In this case, do turn to a tax lawyer to get valuable advice (and professional help) on how to protect your rights and stay out of trouble. 
  • You face tax fraud allegations or owe taxes. This is when you definitely need legal representation in discussions and negotiations with the IRS by a tax attorney. 
  • You have been contacted by the Criminal Investigation Division and are facing tax-related criminal charges, such as evasion or fraud. 

Seek the assistance of an IRS Enrolled Agent if:

  • You need basic tax preparation.
  • Want the most cost-effective solution. 
  • You are not involved in a tax dispute.
  • Need cross-state representation. 
  • Need a simple IRS status check.
  • You want a tax professional for routine matters, such as miscellaneous tax filings and tax planning
  • Need representation before any administrative level of BOE, IRS, CDTFA, FTB, EDD tax agencies. 
  • Want a tax professional to handle issues like IRS appeals, delinquent unfiled tax returns, back tax settlements, employment 941 payroll, liens, garnishments, levies, collections, and tax audits. 

 

So What is Innovative Tax Relief?

Most tax professionals fall into one of the three above categories. Our team at Innovative Tax Relief, however, includes all three! We are an IRS Enrolled Agent and have on staff tax attorneys and CPAs. So regardless of the tax issues you’re dealing with, we can help you.  

Get in touch with us for a free consultation with one of our tax experts and start finding some relief from your tax problems today.

What Is Tax Relief?

happy business person after tax relief

A relatively recent government study showed that more than 20% of tax filers had a 2018 IRS tax bill. This means that one out of every four Americans may not have had enough taxes withheld in the 2018 fiscal year. Things can get quite challenging for taxpayers who owe taxes but have no money to pay their tax bill(s). When that happens, the IRS may offer several tax relief options to help you get out of this unpleasant situation as pain-free as possible.

In this guide, we give you all the details about what tax relief really is, how it works, how much of your due taxes you might be able to reduce, how we can help you find the appropriate tax relief plan for your particular situation, and more.

What Is Tax Relief?

Tax relief is an arrangement where you either negotiate a settlement with the IRS or set up a payment plan with them. So in the end, you get to reduce the tax amount you pay to the government or break down your debt into payments. However, note that this is NOT about relieving you from your tax obligations. It will NOT eliminate your tax bill, either. Nevertheless, it IS a convenient (and much more manageable) way to pay the tax debt you owe to the government.

The IRS also offers special tax relief to victims of natural disasters, such as wildfires and hurricanes. This could include deadline extensions or enable those eligible for tax relief to claim casualty losses on their tax returns. The recent coronavirus pandemic has also forced the government to take tax relief measures for businesses, families, and individuals.

Some states also have tax relief programs for vehicles locally registered within their state borders. You may also find tax relief programs that offer a deferral or exemption of real estate taxes for qualified homeowners that meet certain eligibility criteria.

How Does Tax Relief Work?

You can get tax relief via several different ways, such as tax deductions (i.e., home mortgage interest), exclusion, and credits. Tax liens may also be forgiven – this is quite rare, though. The goal of a tax relief program is to reduce the tax liability of an individual taxpayer or a business. It may also target specific taxpayers, such as those that have suffered material loss due to a natural disaster.

Some forms of tax relief are:

  • A tax deduction that lowers a taxpayer’s taxable income. 
  • A tax credit that reimburses taxpayers for certain expenditures. It is subtracted from the taxpayer’s overall sum of due tax after making all the deductions.
  • A tax exclusion which reduces the taxpayer’s reported gross income amount.

There is also the Fresh Start Program that enables taxpayers to pay reduced tax amounts over time. This applies to outstanding tax debts. 

Tax Relief Options

Below are three strategies/options to help you manage the taxes you cannot pay in full by the given deadline. 

  • The Repayment Plan

You might be allowed to break your balance down into smaller payments. This could be a short-term (paying over in less than 120 days) or a long-term payment plan, depending on the sum you owe in combined taxes, interest, and penalties. So, for debts $50,000 or less, you may qualify for a short-term payment plan while long-term payment plans can include tax bills that reach $100,000 or more. 

A payment plan is an agreement you make with the IRS to repay your due taxes by a certain deadline. Also, note that the IRS applies a user fee to those that qualify for a long-term installment agreement/payment plan in the following situations:

  • If you enable automatic monthly payments from your checking account, you will be asked to pay $31 for online application and $107 if you apply in-person, by mail, or phone. Low-income individuals are excluded from setup fees. This plan is also called the Direct Debit Installment Agreement. 
  • If you decide you want to make monthly payments from your savings/checking account (Direct Pay), then the setup fee for online applications is $149 and $225 if you apply in-person, by mail or phone. The same applies to monthly payments made using the Electronic Federal Tax Payment System (you will need to enroll first), either by phone or online. For low-income individuals, this fee is set at $43, which could be waived if they meet certain conditions. If you prefer to pay via your credit/debit card, some extra fees may also apply, depending on the card issuer. 

In both cases, you should add accrued interest and penalties to the applicable fees until you pay the balance in full. So, this may, indeed, be a helpful plan to consider if you don’t have the money to cover your entire tax bill. However, you should also take into account the fact that setting up the payment plan involves additional fees. 

  • Offer in Compromise

You might be given the chance to pay less than the due amount with an Offer in Compromise tax relief program. So, you may not need to pay your full tax bill if you meet certain criteria. It is important to be able to prove that paying your full tax liability “creates a financial hardship for you” per the IRS description of the program. To determine whether you are eligible for this particular tax relief program, the IRS will probably go through your assets, expenses, income, and ability to pay. 

You could check out if you qualify for this program by using the IRS Offer in Compromise Pre-Qualifier tool. You can find much more details on the Offer in Compromise page. 

  • Penalty Relief

This is an IRS program that opens the way for penalty relief. In other words, whatever penalties have been imposed on your tax bill can be forgiven if you fulfill some conditions.  Among the criteria the IRS uses to evaluate whether you might be eligible for penalty relief is:

  • Arranging payment for the due taxes.
  • Paying for any taxes owed.
  • Not having any penalties for the past 3 years.

Note that even if you qualify, you will still need to pay your taxes, unlike with the Offer in Compromise program. The difference is that after the penalties are removed from your balance, you will then owe less. You may qualify for it if your inability to meet your tax obligations derives from circumstances that are beyond your control, such as a death in the immediate family, a natural disaster, or a house fire.

Note: Getting a personal loan is also an alternative way to help you pay your taxes. This option should be used as a last resort, though, if you don’t have the money to pay your tax bill. In this case, do ensure that the personal loan you secure gives you the best possible rates and that these rates are less than an IRS payment plan/program. To determine that, make sure you conduct your own research on things like personal loan terms and rates. 

And, don’t forget to check your credit reports so that you know what your financial profile looks like. The tax bill you owe the government will not show on your credit reports (so having unpaid taxes doesn’t affect your credit score), but they may be included in public records reports. 

What Do Tax Relief Companies Do?

A tax relief company negotiates with the IRS on your behalf, utilizing their expertise in the area of taxes and tax laws. Of course, this is not a free service. However, it saves you time and worries since these companies handle hundreds of cases every year and know exactly how to work out the best deal between you and the IRS. 

Struggling taxpayers, therefore, can benefit from the experience of these tax relief professionals. At the same time, though, nothing is guaranteed, and you may end up with an unsuccessful outcome. For that reason, it is best to trust respected organizations with a proven track record of successful negotiations with the IRS.   

Note that not all tax relief companies have the authority to become your voice and try to make a financial arrangement with the IRS on your behalf. These tax professionals should either be tax attorneys, certified public accountants, or federally authorized Enrolled Agents that have been given the role of representing taxpayers before the IRS. 

Some of the things you definitely need to pay attention to when considering using a tax relief company are:

  • Any default billing rates that may apply (these are usually activated if you cancel their services).
  • Any upfront fees.
  • The applicable refund policy (some agencies offer unfavorable refund policies for the taxpayer). 

When you book an in-person or over-the-phone meeting with the selected tax professional, feel free to ask as many questions as you feel necessary until you gain a full understanding of your options and the company’s fee structure. Proceed once everything checks out and based on your research you’ve found them to be a trustworthy company.

How Much Tax Relief Can You Get?

How much tax relief you can get depends on your particular case and the program you qualify for. You see, there is a wide range of tax relief programs you might find useful and each one offers a different type of tax relief. For instance, if you are eligible for the Earned Income Tax Credit program (applicable to low-to-moderate income earners), you may have your due tax amount reduced to zero (or even lower and the IRS may owe YOU!). 

So, our advice is to give us a call or request a free tax consultation and have your options assessed by one of our qualified tax professionals. And, if you do qualify for a tax relief program, rest assured that our experienced staff will negotiate the best possible outcome for you with the IRS so that you can finally heave a sigh of relief.