Legal Definitions - enrolled agent (EA)

An Enrolled Agent (EA) is a federally authorized tax practitioner who is empowered by the U.S. Department of the Treasury to represent taxpayers before the Internal Revenue Service (IRS). Unlike many tax preparers, EAs have unlimited practice rights, meaning they can represent any taxpayer (individuals, partnerships, corporations, estates, trusts) on any tax matter, in any IRS office, across all 50 states. This authority is granted after passing a comprehensive examination covering all aspects of taxation or through prior experience as a former IRS employee. Along with licensed attorneys and Certified Public Accountants (CPAs), Enrolled Agents are among the only professionals who can legally represent taxpayers during audits, appeals, and collection issues with the IRS.

Here are some examples of situations where an Enrolled Agent might assist a taxpayer:

• Individual Tax Audit Representation:

  Scenario: Sarah receives a letter from the IRS stating her personal income tax return from three years ago is being audited. She feels overwhelmed and unsure how to respond to the detailed requests for documentation, fearing she might say or do something incorrect.

  EA's Role: Sarah hires an Enrolled Agent. The EA reviews Sarah's financial records, communicates directly with the IRS on her behalf, prepares the necessary responses, and attends all meetings with the IRS agent. The EA ensures Sarah's rights are protected and the audit is handled correctly without Sarah needing to speak directly to the IRS, ultimately resolving the audit efficiently.

  Explanation: This illustrates an EA's authority to represent an individual taxpayer during an audit, handling all communications and appearances before the IRS, thereby alleviating the burden on the taxpayer.

• Small Business Payroll Tax Inquiry:

  Scenario: "Green Thumb Landscaping," a small business, receives an IRS notice questioning their payroll tax filings for the past year, specifically regarding employee versus independent contractor classifications. The business owner, Mark, is busy running his operations and doesn't understand the complex tax codes involved in such classifications.

  EA's Role: Mark engages an Enrolled Agent specializing in business taxation. The EA analyzes Green Thumb's employment classifications, gathers supporting documentation, drafts a detailed response to the IRS inquiry, and negotiates with the IRS agent to clarify the classifications and resolve any potential penalties. This allows Mark to focus on his business while the EA handles the tax dispute.

  Explanation: This demonstrates an EA's ability to represent a business entity in a complex tax matter, addressing specific IRS inquiries and negotiating on the business's behalf to resolve classification disputes and potential penalties.

• Tax Debt Resolution and Negotiation:

  Scenario: David owes a significant amount of back taxes and penalties to the IRS and is struggling to pay due to unforeseen financial hardship. He's received several threatening collection notices and is worried about wage garnishment or liens on his property.

  EA's Role: David consults an Enrolled Agent who specializes in tax resolution. The EA works with David to understand his complete financial situation, then contacts the IRS to negotiate an Offer in Compromise (a settlement for a lower amount) or an Installment Agreement (a payment plan) on David's behalf. The EA handles all correspondence and discussions with the IRS collections department, aiming to achieve the best possible outcome for David to resolve his tax debt and prevent further enforcement actions.

  Explanation: This shows an EA's role in representing a taxpayer in a collection matter, negotiating payment plans or settlements directly with the IRS to resolve outstanding tax liabilities and protect the taxpayer from aggressive collection tactics.