Frequently Asked Questions

UNDERSTANDING  TAX PROFESSIONALS  CREDENTIALS

What are the differences between EAs and CPAs?

Enrolled Agents are specialized tax professionals federally licensed by the U.S. Treasury Department.

Enrolled Agent status is the highest credential the IRS awards.

EAs are governed by the Internal Revenue Service Office of Professional Responsibility with strict adherence to the rules and regulations of the Treasury Department Circular 230, Title 31 Code of Federal Regulations, Subtitle A, Part 10 that are the Regulations Governing Practice Before the Internal Revenue Service.

EAs generally have completed undergraduate studies in business management, accounting or other specialized fields.  Many EAs have graduate-level master’s degrees in taxation.

To meet the enhanced education criteria necessary, EAs complete extensive study exclusively in taxation and pass a three-part Special Enrollment Examination (SEE).

All three parts of the Special Enrollment Examination includes questions in the areas of taxation and ethics:

  • Individuals Taxation
  • Business Taxation
  • Representation Practices and Procedures

The education necessary to pass the three-part examination questions includes:

  • Individuals Taxable Income and Tax-Exempt Income
  • Preliminary Work and Taxpayer Data
  • Individuals Assets
  • Deductions and Credits
  • Taxation and Advice
  • Estate and Trust Taxation
  • Gift Taxation
  • Foreign Income Reporting Requirements
  • Business Entities Formation (Sole Proprietorships, Partnerships, Corporations and S Corporations)
  • Business Financial Information
  • Business Income
  • Business Expenses
  • Business Deductions and Credits
  • Business Compensation For Officers and Employees
  • Worker Classification
  • Business Payroll Tax Liabilities
  • Business Inventory
  • Business Assets Depreciation and Dispositions,
  • Analysis of Financial Records,
  • Advisement For The Business Taxpayer
  • Exempt Organizations Qualifications
  • EO Maintaining Tax Exempt Status
  • EO Income and Expense Reporting Requirements
  • EO Unrelated Business Taxable Income
  • Retirement Plans Contributions
  • Retirement Plans Distributions
  • Retirement Plans Prohibited Transactions
  • Qualified and Non-qualified Plans
  • Representation Practices and Procedures
  • Due Diligence Requirements
  • Conflicts of Interest
  • Standards For Written Advice
  • Covered Opinions and Tax Return Positions
  • Sanctionable Acts
  • Accuracy
  • Information Shared With Taxpayer
  • Records Maintenance
  • Rules and Penalties
  • Identification of Tax Issues With Supporting Details
  • Supporting Documentation
  • Taxpayer Financial Situations
  • Potential Criminal Aspects
  • Competence and Expertise
  • Power of Attorney and Declaration of Representative
  • Representing Taxpayer In Audit/Examination
  • Representing Taxpayer Before Appeals
  • Representing Taxpayer In The Collection Process
  • Collection Alternatives and Settlement
  • Data Security and Protection of Taxpayer Information

Enrolled Agents must also meet good moral and ethical character standards for licensing and renewal to continue their privilege of Unlimited Rights to Represent Taxpayers Before the Internal Revenue Service and maintain Continuing Professional Education specifically in areas of:

  • Federal Tax Updates
  • Federal Tax Law
  • Professional Ethics

An Enrolled Agent credential may also be earned as a former employee of the Internal Revenue Service.

Only Enrolled Agents, Certified Public Accountants and Attorneys have Unlimited Rights To Practice.

This means only these professionals are unrestricted as to which taxpayers they can represent, what types of tax matters they can advise or represent, and which IRS offices they can represent taxpayer clients before.

Click on the link below to review the Internal Revenue Service information
https://www.irs.gov/tax-professionals/understanding-tax-return-preparer-credentials-and-qualifications

Click on the link below to review the U.S. Treasury Department Circular 230
https://www.irs.gov/pub/irs-pdf/pcir230.pdf

Click on the link below to review the EA Special Enrollment Exam SEE Part 1 Individuals Tax Topics
https://www.prometric.com/en-us/clients/SEE/Documents/IRS_Exam_Content_SEE_Part1.pdf

 

Click on the link below to review the EA Special Enrollment Exam SEE Part 2 Businesses Tax Topics
https://www.prometric.com/en-us/clients/SEE/Documents/IRS_Exam_Content_SEE_Part2.pdf

 

Click on the link below to review the EA Special Enrollment Exam SEE Part 3 Representation Practices and Procedures
https://www.prometric.com/en-us/clients/SEE/Documents/IRS_Exam_Content_SEE_Part3.pdf

  Although the letters CPA are commonly known by people, most members of the general public do not understand that these letters do not specifically mean the person has specialized current knowledge in taxation, any specialized current expertise in tax laws, tax planning, income tax returns preparation or tax case representation.

CPAs have generally completed undergraduate study in accounting at a college or university which may include some general coursework in taxation. Some CPAs have graduate-level master’s degrees.

CPAs must pass the four-part Uniform CPA Examination to be licensed by state boards of accountancy.

One part of the Uniform CPA Examination (Regulation -REG) that is ¼ of the examination includes questions in the areas of:

  • Ethics
  • Professional Responsibilities
  • Federal Tax Procedures
  • Business Law
  • Federal Taxation of Property Transactions
  • Federal Taxation of Individuals
  • Federal Taxation of Entities

To meet State boards of accountancy license and renewal requirements, CPAs also are required to meet experience, good character standards, peer review and maintain specified levels of Continuing Professional Education.

Each state’s requirements for Continuing Professional Education vary.

The State of Texas does not have any specified requirement for Continuing Professional Education in taxation.

CPE in the areas of taxation is at the option of the CPA.

As listed in the State of Texas Administrative Code, Continuing Professional Education for a CPA may include technical courses in:

  • Accounting
  • Attestation
  • Tax
  • Management advisory service
  • Economics
  • Finance
  • Computer information technology
  • Regulatory ethics
  • or other areas of benefit to the licensee or their employer

As listed in the State of Texas Administrative Code, Continuing Professional Education for a CPA may include non-technical courses in:

  • Communications
  • Computer software
  • Behavioral ethics or science
  • Business management and organization
  • Advanced foreign languages

To determine if the CPA you are working with has current Continuing Professional Education and knowledge in the specialized area of taxation, it is in your best interest to specifically ask to see their Certificates of Continuing Professional Education courses in taxation including Annual Federal Tax Updates, Federal Taxation, Business Tax Matters, Individuals Tax Matters, Estates and Trusts Tax Matters.

We would be happy to show you ours.

Click on the link below to review the continuing professional education requirements specified in the Texas Administrative Code
http://texreg.sos.state.tx.us/public/readtac$ext.TacPage?sl=R&app=9&p_dir=&p_rloc=&p_tloc=&p_ploc=&pg=1&p_tac=&ti=22&pt=22&ch=523&rl=102

Click on the link below to review the Internal Revenue Service information
https://www.irs.gov/tax-professionals/understanding-tax-return-preparer-credentials-and-qualifications

Click on the link below to review the Uniform CPA Exam parts topics
http://www.ais-cpa.com/cpa-exam-sections/

 What are the differences between a State Bar Licensed Attorney and a United States Tax Court Practitioner counsel?

Attorneys have extensive education in various practice areas of law and have passed a rigorous bar examination administered by their state for admission to the State Bar.

Attorneys may also be admitted to practice by other state or federal courts.

They have a general right to practice in their choice of law or specialty. They are unrestricted and can practice in a single area or multiple areas such as family law, real estate law, business law, civil law, criminal law, tax law, tax planning, tax preparation or a variety of other specialty areas.

Attorneys who choose to represent taxpayers before the United States Tax Court are only required to pay a separate nominal fee to the court for admission to the U.S. Tax Court Bar if they hold an active State Bar license that is active and they are deemed in good standing.

For license renewal, attorneys similarly are required to participate in extensive Continuing Legal Education for credits that vary per state.

United States Tax Court Practitioner counsels are admitted to the U.S. Tax Court Bar by means of passing a rigorous examination administered by United States Tax Court in Washington, DC bi-annually in even-numbered years.

The examination candidates eligible to sit for the examination are Enrolled Agents, Certified Public Accountants and other professional types.

The examination is a four-part, four hour written essay type examination covering topics of:

  • Tax Court Rules of Practice and Procedure
  • Substantive Tax Law
  • Federal Rules of Evidence
  • American Bar Association Model Rules of Professional Conduct

Each examination part must be passed with a score of 70% or higher.

The examination is extremely challenging for even the most knowledgeable tax experts. The passing rate is extremely low.

2000       16.67%                  17 Passed of 102 Exam Candidates

2002       14.89%                  7   Passed of   47  Exam Candidates

2004       5.56%                    4   Passed of   72  Exam Candidates

2006       10.34%                  6   Passed of   58  Exam Candidates

2008       14.81%                  8   Passed of   54  Exam Candidates

2010       9.64%                    8   Passed of   83  Exam Candidates

2012       14.29%                  11 Passed of   77  Exam Candidates

2014       18.25%                  23 Passed of 126  Exam Candidates

2016       13.45%                  16 Passed of 119  Exam Candidates

 Upon passing an examination candidate must also meet strict moral, ethical and professional character expectations of the court and be sponsored by at least two persons admitted to practice as members of the U.S. Tax Court Bar.

United States Tax Court Practitioner (USTCP) counsels must maintain extensive Continuing Professional Education in the areas of taxation and Continuing Legal Education in the areas of law.

A United States Tax Court Practitioner (USTCP) counsel is limited to the practice and advisement of tax law and cannot practice or provide advisement in any other area of law.

Click on the link below to review the criteria for the U.S. Tax Court Non-Attorney Examination
https://www.ustaxcourt.gov/NonAttorney_Exam_Procedures.pdf

Click on the link below to review the U.S. Tax Court Non-Attorney Examination Statistical Information Numbers Who Passed
https://www.ustaxcourt.gov/NonAttorney_Exam_Statistics.pdf

 

My CPA (or EA) told me they can take my case to Tax Court, can they?

This is a significant problem.

The immediate answer is NO!  Unless that CPA or EA has also been admitted to the United States Tax Court Bar.

Understand that only State licensed attorneys who are also admitted to the U.S. Tax Court Bar or United States Tax Court Practitioner’s who are also admitted the U.S. Tax Court Bar can legally petition your case to Tax Court and directly represent you!

These professionals must sign the petition and list their U.S. Tax Court Bar Number.

This fact is of substantial importance for taxpayers!

A tax professional with the designations as Unenrolled Preparer, a preparer with the former registration designation (RTRP), a preparer with current tax year approval (AFSP), an Enrolled Agent (EA) or a Certified Public Accountant (CPA) whom is NOT admitted to the U.S. Tax Court Bar CANNOT directly represent your tax controversy case before the judges of United States Tax Court.

Know that these designated professionals do not possess the qualifications or knowledge necessary of the procedural rules of the court, rules of evidence or rules of ethics to adequately represent a taxpayer before the court.

Know that any advisement received from any of these persons is the unauthorized practice of tax law.

They do not possess the recognized knowledge or qualifications to render proper advisement.

They do not have the authority under the law to sign a Tax Court Petition because they do not hold an active bar license in good standing with the court.

Any Tax Court Petition prepared and filed to the U.S. Tax Court by these designated professionals will be docketed by the court as a Pro Se case. This is the Latin phrase meaning “for oneself” or “on one’s own behalf”.

This means that YOU are self-representing before the court.

Sadly, we hear of these circumstances quite often which is a direct compromise of the plaintiff taxpayer’s case when unlicensed persons attempt to advise innocent unknowing taxpayers. This is the Unauthorized Practice of law.

When the unknowing taxpayer’s case actually is heard before the judges of the court, the CPA (or EA) cannot litigate the case, cannot confer with IRS counsel and cannot speak to the judge.

Know that generally the Commissioner of the IRS will have at least 2, and sometimes more, attorneys on the case.

You need the knowledge and experience of a properly licensed professional to advocate on your behalf.

Why do they say they can do something that they can’t really do?

Because you, the innocent taxpayer, doesn’t know any different. You have trusted that they have the knowledge and did not verify otherwise.

The second reason is that they are “banking” on the fact that the IRS Office of Appeals retains jurisdiction on Small Tax Cases up to the time of trial and retains jurisdiction on Regular Tax Cases for the first six months after the petitioned case is docketed for trial. During this period, the court may remand a case back to IRS Appeals that either was not previously subject to an Office of Appeals review or the court may remand a case back to IRS Appeals if the case administrative record is insufficient or incomplete.

In these circumstances, the CPA (or EA) is hoping that they can continue to advocate the case because under their active license they do have Unlimited Rights To Represent taxpayers before the IRS Office of Appeals.

Problem is not all cases, or all matters of the case, can be resolved within the IRS Office of Appeals and subsequently will necessitate a trial.

The other substantial problem is that the CPA (or EA) has no qualified knowledge of the various procedural rules of the court, rules of evidence or trial mechanics, therefore they fail to properly plead all matters as required, fail to file proper motions and fail to complete many other case management requirements.

If you need a surgery, anyone can tell you they’ll save you money because they can purchase scalpels at any medical supply store, buy bandages, gauze and surgical tape. This does not make them a surgeon!

Don’t be confused by the terms “Litigation Support”!

Although the state’s boards of accountancy permit CPAs to advertise and promote “Litigation Support” this does not mean that they can practice law, tax law or represent any taxpayer before the U.S. Tax Court.

Litigation support is the act of serving as an Expert Witness at trial on matters related to accountancy or the capability to provide assistive information relating to accountancy to a licensed attorney or USTCP.

 

The Taxpayer Advocate Service provides an Annual Report to Congress. This special report includes substantial matters relating to the IRS. In most years the TAS report shows that the IRS prevailed in over 80% of Pro-se cases tried before U.S. Tax Court.

Click on the link below to read the TAS most recent report to Congress
https://taxpayeradvocate.irs.gov/

If you are still not convinced that it’s a bad idea to have a CPA petition your case to U.S. Tax Court, we encourage you to click on the link below to read the “blunders” of a case in which the taxpayer was poorly advised from the day of the income tax return preparation to the day of trial and even during trial.
Tax Court Summary Opinion 2017-93
MARY A. COLLIVER, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 15307-16S. Filed December 26, 2017.
https://www.ustaxcourt.gov/UstcInOp/OpinionViewer.aspx?ID=11523

With all this being said, is it worth risking tens of thousands of dollars to the IRS to save a few hundred dollars on your tax returns preparation, tax representation case before the Internal Revenue Service or tax litigation before the United States Tax