Many students who are about to graduate from college with a 4 year degree in accounting wonder whether they should choose to become a CPA or perhaps a EA. You would want to carefully consider all options before you, reach a decision – and then stand by it until you achieve your lofty goals.
Both paths involve a lot of hard work, dedication, commitment and clarity of thought. Here is how these two professions compare.
A enrolled agent is a specialist in taxation. They are certified by the IRS. They have unlimited authority to represent any individual taxpayer or organizations in civil matters before the IRS. They usually specialize in areas such as gift tax, trusts and estates
In contrast, a CPA may or may not specialize in taxation. Typically, as a CPA you will be working in public accounting and working in areas like auditing, certifying financial statements and the like. A CPA is certified by one of the state boards of accountancy, and can practice only within the state where they are licensed to practice. CPAs are not required to know about tax laws.
CPAs are usually have a much broader set of skills and know-how related to how businesses function and are essentially highly skilled accountants and auditors, while EAs are experts in matters related to the tax laws – but they are usually not accountants or auditors.
But there are always exceptions. Some CPAs are also tax experts, while some EAs are also accountants.
CPAs look at the whole financial picture of a business, analyse data, crunch numbers and make projections that help business owners make better financial decisions. EAs help you file your taxes.
A enrolled agent usually has a four year college degree, and has several credit hours in accounting and taxation. Some might even have a masters degree in taxation. To become an enrolled agent, you will either have two pass IRS Special Enrollment Examination that covers just about every aspect of the tax code. Or, you will have to work at the IRS for a minimum period of at least five years in a position where you would be required to interpret the tax code on a regular basis. In addition, you will need to take at least 72 hours of continuing education in every three year period to maintain your status.
For the CPA too, you will need to have at least a bachelor’s degree with a focus on accounting. Many CPAs also have master’s degrees in accounting or taxation to fulfill the 150 credit hour requirement for the CPA exam. Also, you will need to pass the CPA exam to become a CPA, and meet work experience requirements – there are no exemptions from this.
The path to becoming a CPA involves a lot more effort and is harder. Becoming a enrolled agent is easier compared to getting a CPA license.
Recognition and Popularity
CPA is definitely more popular. There are about 450,000 CPAs in the US according to the CPA directory, while there are only about 46,000 EAs according to the NAEA. So roughly, there are 10 times more CPAs than EAs.
Salary and growth
Enrolled agents can expect to start at $30k a year. Experienced EAs make up to $45k or more per year.
CPAs typically start at $65k per year, and experienced CPAs make more than $100k a year.
You shouldn’t let salary be the only factor you base your decision on. It also depends on what you want to do, and where your strengths are. If tax laws are what you want to learn, you could become a EA or even a tax attorney. But if accounting fascinates you, then you would want to become a CPA.
If growth and career advancement are what you are after, CPA is what you should be aiming for. Many companies require CPA certification for senior management positions. They have better chances of getting promoted because they are more familiar with how a business works and how to make it grow.
Here’s a very informative video by a CPA explaining the major differences between tax preparers, enrolled agents, CPAs and tax attorneys.