5 Things You Didn’t Know About Enrolled Agents

IRS EnrolledAgent_LogoNo one’s heard of Enrolled Agents, so almost anything that I were to tell you about EAs would be something you “didn’t know.” But here’s a list of 5 things that jump out to me about EAs that I would like to share.

1. We’ve been around since 1884

For a designation that no one’s heard of, the EA has existed for a long time — 130 years to be exact. The bill that created the EA designation (the “General Deficiency Appropriation Bill,” or “Horse Act of 1884) was signed into law on July 7, 1884. The short version of the reason for this law is: after the Civil War, Congress allowed citizens to submit claims for reimbursement for property losses suffered during the war. Many of these claims were fraudulent, and were being filed by representatives acting on behalf of the citizen. Thus the EA designation was created in an effort to regulate who could file claims with the government and to give the government the ability to sanction representatives who filed fraudulent claims.

2. We don’t work for the IRS

The word “agent” automatically conjures up thoughts of “IRS agent.” But we don’t work for the IRS. The term Enrolled Agent can be defined in this way: “enrolled” means that we are recognized by the U.S. Treasury and IRS to act as an “agent” for citizens when dealing with tax matters. Hence, “Enrolled Agent.”

3. There are two ways to become an EA

The EA designation is awarded by the Treasury Department after a person either 1) passes a series of exams or 2) works for the IRS for at least 5 years in a position that requires interpretation of tax law. The IRS regulates EAs.

4. The Special Enrollment Exam is not a tax preparation exam

One myth that’s out there is that the EA exam (the technical name is the “Special Enrollment Exam” or “SEE”) is an exam about tax preparation. It’s not.

The SEE contains 3 parts: individual taxation, business taxation, and “representation, practice, and procedure” (Basically, working with the IRS).

There are zero test questions that ask you to take information and create a tax return. You might need to perform calculations (I remember having questions about calculating the daycare credit; and there were LOTS of questions about basis during the business portion of the test) but not once are you asked to create a tax return.

The SEE is designed to test a person’s knowledge of the tax code and IRS procedures, because EAs are legally empowered to represent taxpayers in front of the IRS.

5. In the tax world, we are 100% equal to CPAs and attorneys

There are 3 groups of licensed professionals who have unlimited practice rights when handling tax matters for taxpayers: CPAs, attorneys … and Enrolled Agents.

I’ll go into more detail about each of these points in blog posts in the weeks to come.

I Don’t Have Time to Write Grant Proposals or Meet with Donors … But Give Me Money Anyway!

window-washer-30554A few weeks ago I attended a conference in my capacity as a board member of a not-for-profit. This was not a “business” conference for me, because the conference was related to the work the not-for-profit does, not to accounting. I was there as a board member, not an accountant.

But of course, I can’t just turn off the accountant part of my brain. And some things were said at this conference that I have to blog about here in relation to not-for-profit and small-business management.

I Don’t Have Time to Do the Dirty Work

Many of the people at this conference were activists who were trying to get not-for-profits off the ground. Here are two quotes that stood out to me:

There’s too much work to be done in the field. I don’t have time to waste writing grant proposals


I don’t have time to meet with funders. Why don’t they come to me?

Not-for-profits aren’t that different from businesses, in that many of the leaders of not-for-profits that I encounter are Joe the Window Washers. They believe strongly in the mission of their group. They love helping people and doing the work that furthers the mission of the group. They have no use for anything that’s not directly related to the organization’s core mission.

The problem is: as with businesses, not-for-profits have a certain amount of crap that has to be dealt with:

  • Someone has to meet with donors
  • Someone has to write the grant proposals
  • Someone has to deal with IRS filings
  • Someone has to keep the books
  • Someone has to manage the volunteers and/or employees

“Someone” is not a mystical fairy that comes in the middle of the night to wave a wand and make the hard stuff go away.

I think this reality is even harsher for not-for-profits than for small businesses.

A business owner can be a Joe the Window Washer and keep things small and manageable. Yes Joe has to accept that there will be some amount of bureaucracy to deal with, but he can do things to keep his sanity.

Not-for-profits don’t really have the option to just be a Joe, because not-for-profits have more hoops to jump through. And unfortunately, it’s the founders who will have to jump through those hoops.

Image courtesy of user Nemo on Pixabay.com

My Experiences at the NAEA Leadership Academy

Pic of me at SSLA
My graduation picture. On the left is Mike Nelson, Executive Vice President of NAEA. On the right is is Terry Durkin, EA, President-Elect of NAEA.

I had the privilege of attending the Schuldiner/Smollan Memorial Leadership Academy conducted by the National Association of Enrolled Agents. This academy teaches about effective governance of state affiliates of NAEA (and I feel the concepts taught can apply broadly to all not-for-profit boards).

I’m not big on over-the-top emotional expressions and exaggerations, but I have to say: this was a life-changing experience. And it was FUN. The camaraderie of my group was unbelievable. I made so many great connections. And I learned valuable information.

I’m president of the Iowa Society of EAs. We used to be an active group. We’d get 30 people attending meetings, which is amazing for a group our size (we topped out at around 75 members).

Over the last 5 years, the group has drifted apart. We’re down to approximately 55 members, and no one comes to meetings anymore. We have a skeleton board of directors that meets by phone a few times a year, but we haven’t had a face-to-face meeting in 18 months, and only 3 or 4 people attended that meeting.

Attending the leadership academy will help turn the Iowa Society around. In my application for the academy, I wrote that I felt it was vital to keep the group alive, because EAs have to stick together.

Because there are so few of us, some would say (and some have said) to just let the group die. This cannot happen. EAs in Iowa are small in

The view from my hotel room in Orlando where I attended the leadership academy. It was about 50-degrees warmer there than back home in Iowa!
The view from my hotel room in Orlando where I attended the leadership academy. It was about 50-degrees warmer there than back home in Iowa!

number … but that’s all the more reason for us to stick together! Most of the EAs I know are solo operators such as me, and we tend to exist in isolation in our own little silos. The number-one thing EAs in Iowa have told me they want is networking and a sense of community. Keeping the Iowa Society alive will help provide that.

I have too many thoughts about the future of EAs, lessons learned, the future of ISEA, and thoughts on not-for-profit governance in general to put into this blog post. More to come.

IRS Oops on E-Services E-mail

error-63628_1280Earlier this month, the following e-mail arrived in my inbox (and in many other tax preparers’ inboxes):

Congratulations!  Your e-filing firm is eligible to use the e-Services incentive products.  The following incentive products are now available:

Disclosure Authorization allows you to submit Form 2848, Power of Attorney and Declaration of Representative, and Form 8821, Tax Information Authorization electronically.

Electronic Account Resolution enables you to expedite closure on clients’ account problems by electronically sending/receiving account related inquiries. You may inquire about individual or business account problems, refunds, installment agreements, payments or notices.

Transcript Delivery System provides online tax return transcripts, account transcripts and a record of account for both individual and business taxpayers.

Remember that you must have a power of attorney on file before accessing client’s records using Electronic Account Resolution or Transcript Delivery System.

Principals or Responsible Officials can grant their employees access to these e-services through the on-line e-file application.  First, add individual employees to the e-file application using the Delegate User function.  Next, activate the individual e-services for an employee using the Delegate Authorities link.

I was excited to receive this because it seemed to indicate that the IRS was bringing back the ability to elecronically file power of attorney forms.

I wanted to jump on this right away, but caution told me to sit on it for awhile so I flagged the e-mail for follow-up later this week.

My caution proved to be justified when I received the weekly “E@lert” published by the National Association of Enrolled Agents. Other EAs had received the same e-mail and asked NAEA about it. NAEA asked the IRS for more information and here’s what happened:

The response (to us as well as to the members who received the initial message — some as many as nine times): a follow-up “oopsie” e-mail. Subject line: Disregard email about e-services products. The full text follows:

“If you received an Oct. 23 email notifying you that you are eligible for e-services Incentive Products (TDS, DA, EAR), please disregard as this email was inadvertently sent. We apologize for any inconvenience this may have caused.”

That’s quite a mistake to “inadvertently” send an e-mail to practitioners, implying that online services were available again when they really aren’t. Especially since the IRS doesn’t intend to send a follow-up retraction to all of us who got the original e-mail.

Thank goodness NAEA published the IRS retraction, because otherwise I would have tried using the system again to submit power of attorney forms and I would have been confused as to why it wasn’t working.

Of course, I have long been confused as to why the IRS did away with the ability to submit power of attorney forms online, as I blogged about in the past.

Image courtesy of user Geralt on Pixabay.com

Meet Joe the Window Washer

window-washer-30554Meet Joe.

He’s a window washer, one of the best in the country. He’s developed his own window-washing systems and cleaning solutions.

Joe’s business is the envy of other window washers. They call him, wanting to know his secrets.

Joe’s customers love him.

Joe started his business because he had a knack for washing windows, and he wanted freedom from “workin’ for the man.”

Joe just wants to wash windows and be left alone by the world.

He hates the government. He hates regulations. He hates paperwork, whether it’s government-related, or insurance-related or bank-related. Paperwork really bothers him.

He’ll grudgingly file a tax return at tax time, but that’s the extent of what he’s willing to do when it comes to dealing with bureaucracy.

Joe has thought about expanding his business. His customers and friends tell him he could have a window-washing empire. Some even suggest franchising.

But Joe doesn’t want the hassle and headaches associated with growth and expansion.

He knows he’ll probably never get fabulously wealthy. He knows his business will die when he dies or retires. And he’s okay with that, because he would probably have to hire an attorney to help with planning, and he thinks attorneys are money-sucking leeches.

If Joe works with an accountant, the relationship consists solely of Joe handing the accountant a sheet of paper with Joe’s back-of-the-napkin tally of income and expenses for the year so the accountant can plug the numbers into a tax return and get it filed for another year to keep the government off his case for another year.

Joe has no interest in having an accountant keep his books, or give him business advice. What a waste of money!

Joe just wants to wash windows and be left alone.

Joe is fictional. But he describes more than a few of the small business owners I work with.

And here’s something important that needs said: It’s okay to be Joe the Window Washer.

So much of what we read about entrepreneurship focuses on growth and expansion. If you’re not growing and expanding, you’re a failure.

With Joe the Window Washer, I’m saying it’s okay to keep your business small and manageable. It’s not a matter of “don’t grow your business.” It’s more a matter of “don’t grow beyond your means to successfully manage it.”

That means you have to know yourself and what you can handle. It might mean deciding to keep your product or service offerings and territories small and manageable. It might mean not hiring employees.

It’s okay to be Joe the Window Washer, but it’s important to know that about yourself before you get too far along in growing your business.

And it’s okay to change your mind as the years progress. You might start as Joe the Window Washer and then change in a few years and decide to hire employees or go for big growth.

Or maybe you go for big-time growth at first, and then realize you made the wrong choice and you decide to downsize. That’s okay too.

Joe will be making more appearances on this blog in future posts so look for him to appear again.

Image courtesy of user Nemo on Pixabay.com