Don’t Overlook an Enrolled Agent at Tax Time

By Cora M. Barnhart •

Possible confrontations with the IRS haunt many working Americans. While some level of paranoia during the tax season may seem reasonable, there are indeed times when you need special help with your taxes.

Serious personal problems can sometimes prevent a taxpayer from filing a return and this omission could escalate into several years. Eventually, good intentions to comply with the tax laws can fade as the individual imagines possible retribution for these missed returns. Can these delinquent offenders safely become tax-compliant again?

The answer is yes, but you likely will need some help. Consider an enrolled agent.

History and responsibilities

Enrolled agents are tax professionals licensed to represent taxpayers before the IRS. The profession dates back to 1884. Many taxpayers claimed losses from the Civil War that were questionable, and Congress recognized a need to regulate individuals representing citizens dealing with the Department of the Treasury about their taxes. President Chester Arthur responded by creating enrolled agents.

Today, enrolled agents assist taxpayers in a number of ways:

  • They prepare tax returns.
  • They answer questions regarding national, state and local tax laws.
  • They represent taxpayers in disputes with the IRS.

Enrolled agents prepare millions of tax returns annually. They also provide tax assistance for estates, trusts, partnerships, corporations and other entities that are required to report taxes.

Comparisons to other tax professionals

What does it mean to say an individual is an enrolled agent? “Enrolled” refers to the fact that the federal government licenses these professionals. They are “agents” in that they are authorized to appear in place of a taxpayer before the IRS.

Enrolled agents differ from other tax professionals in a number of ways;

  • They are required to demonstrate their competence in tax matters before they represent a taxpayer before the IRS.
  • They all specialize in taxation.
  • They receive their authority from the federal government instead of the state government.

Attorneys and certified public accountants don’t always specialize in taxes. They also have state licenses, which limits where they can practice in the U.S.

Training and continuing education

So you want to become an enrolled agent? Or you just want to understand your tax professional’s background? Basically, there are two ways an individual can earn the designation:

  • Pass a rigorous, two-day exam administered by the IRS before undergoing a detailed background check; or
  • Work at the IRS for at least five years, regularly interpreting IRS codes and regulations.

Enrolled agents must also complete 72 hours of continuing professional education every three years to maintain their status.

Haven’t filed in a while?

If you haven’t filed a required tax return, for any reason, you should contact an enrolled agent. Once the IRS designates you as a nonfiler and has to search for you, they could:

  • Take part of your paycheck.
  • Place a lien on your property.
  • Freeze or seize your bank accounts.
  • Prosecute you.

Voluntarily filing your missing tax returns works in your favor. Refunds are due on three out of four returns, so there is a possibility you are entitled to a refund. However, you must request it within two years of the time it is due or the IRS won’t repay you.

Already thinking coming forward is a waste of time because you know you owe the IRS taxes? Don’t panic, you can still do the right thing. If you owe less than $10,000 and will be able to pay the full amount within three years, you can set up a monthly installment plan with the IRS.

What if you owe the IRS more money than you will ever be able to pay? Your enrolled agent may be able to work out a compromise with the IRS so that the amount is adjusted to one you will be able to pay.

What happens if the IRS accepts your Offer-In-Compromise, or OIC? The IRS considers your total tax liability, including interest and penalties, paid in full. However, an OIC is a mathematical formula, not an amnesty program. The National Association of Enrolled Agents, or NAEA, strongly recommends professional assistance when compromising a tax liability.

Locating an enrolled agent

Contact the National Association of Enrolled Agents to find an enrolled agent in your area. You can do this in one of several ways:

  • Go to the group’s Web site and search its agent directory.
  • Call the NAEA 24-hour referral service toll-free at (800) 424-4339.
  • Write your request to the NAEA at:
    National Association of Enrolled Agents
    1120 Connecticut Avenue, NW, Suite 460
    Washington, DC 20036

Many enrolled agents are also listed in the Yellow Pages. Look under headings such as “tax preparation” and “enrolled agent.”

Here’s hoping that your tax situations never require such specialized tax help. But if you do find yourself in tax trouble one day then an enrolled agent could be just the help you need.

— Updated March 4, 2009