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Tag Archive for Tax Practitioner

Kovel Agreements: The Solution To Well-Meaning But Useless Tax Practitioner – Client Privilege?

Contrary to popular belief, there is no accountant-client privilege recognized in federal law. However, in 1998, Congress enacted a limited privilege for tax advice. Section 7525 extends the same common law protections of confidentiality that apply to communications between a taxpayer and an attorney to communications between a taxpayer and any “federally authorized tax practitioner.” IRC § 7525(a)(1).

Thus, if the communication would be considered privileged if it was between a taxpayer and an attorney, then so too will it be privileged if it is between the taxpayer and a federally authorized tax practitioner. IRC § 7525(a)(3)(A). The term, “federally authorized tax practitioner” applies to any individual who is authorized to practice before the IRS. For example, it includes CPAs, enrolled agents, and enrolled actuaries. Read more

What Is An Enrolled Agent (EA) And Why Is This Designation Superior To Certified Public Accountant (CPA)

The Enrolled Agent (EA) is arguably the longest standing professional tax designation.  Although at times overshadowed by other tax professionals EA’s are the only federally licensed tax practitioners who specialize in taxation.

The EA was established in 1884 when Congress acted to regulate persons who represented citizens in their dealings with the U.S. Treasury Department.  Only Enrolled Agents, Attorneys and CPA’s have unlimited rights to represent taxpayers. Enrolled Agents focus specifically on the US Tax Code.

To become a candidate for the EA designation one must pass the Special Enrollment Exam (SEE), a three-part examination covering Individuals, Businesses, and Representation, Practices and Procedures.  If successful an EA candidate is then subjected to a rigorous background check conducted by the IRS.  Once approved as an EA each person must fulfill annual continuing education requirements.

Empowered by the U.S. Department of the Treasury, Treasury Circular 230 provides the rules of practice for Enrolled Agents as well as certified public accountants, and tax attorneys; with oversight provided by the Office of Professional Responsibility (OPR).

Due in large part to the stringent testing required to become an enrolled agent and the requirements to maintain the license, there are only about 46,000 practicing enrolled agents.

Basically Enrolled Agents are federally authorized with licenses issued by the US Treasury enabling practice in all states in the United States. Alternatively CPA’s are state licensed and as such can only practice in the states where they are licensed.

Ultimately though the biggest difference is that the most astute CPA’s rely on the expertise of Enrolled Agents when seeking clarity on the US Tax Code.