Are you familiar with the term enrolled agent? Maybe you've heard it used in passing but you're not entirely clear on what it means. It's important to understand the unique tax services an enrolled agent can help you with, so in this post we're going to talk more about how they work and what they do.
To define this term, let's go right to the source! Here's how the IRS defines it:
"An enrolled agent is a person who has earned the privilege of representing taxpayers before the Internal Revenue Service by either passing a three-part comprehensive IRS test covering individual and business tax returns, or through experience as a former IRS employee. Enrolled agent status is the highest credential the IRS awards. Individuals who obtain this elite status must adhere to ethical standards and complete 72 hours of continuing education courses every three years.
Enrolled agents, like attorneys and certified public accountants (CPAs), have unlimited practice rights. This means they are unrestricted as to which taxpayers they can represent, what types of tax matters they can handle, and which IRS offices they can represent clients before."
According to the National Association of Enrolled Agents (NAEA), there are currently about 53,700 practicing enrolled agents in the country.
Now that we've covered what it means, let's talk about whether your business needs an enrolled agent.
So, you know that an enrolled agent holds the highest credentials from the IRS and that they are regarded as tax experts. But does your business need one?
The answer is, it depends! But for most businesses, the tax services an enrolled agent provides are incredibly beneficial.
Simply put, for basic bookkeeping and managing your business's finances, outsourcing your bookkeeping to a company like Two Roads is the way to go. That being said, there are certain circumstances when the credentials of an EA are particularly useful, along with their specific skill set.
This is why, in addition to our bookkeeping services, we also have an enrolled agent on our team who provides a number of specialized tax services.
Here are some examples:
If you are being audited, an EA can advocate on your behalf (they can be given power of attorney)
In the event the IRS has questions about your taxes, an EA can also advocate for you
EAs can help small businesses settle an appeal or collections matter
When you are starting a new business and need to select your legal entity
EAs (and bookkeepers) can help you determine which business expenses you can deduct from your taxes
(Speaking of deductions, don't miss this post next: 4 Small Business Habits for the BEST Tax Deductions)
Finally, does your business file tax returns in more than one state? In that case, an EA will be an invaluable resource! Unlike CPAs who are licensed to operate in a single state, enrolled agents can operate across state lines. However, if your business files returns in a single state, a CPA can sufficiently handle your returns.
(Are you curious about the differences between bookkeeping and accounting? Find out here!)
As you can see, an EA can be a powerful asset for many business owners. They can help with a variety of tax services that can have a meaningful effect on the success of your business.
The new tax division at Two Roads includes an enrolled agent who can help with a variety of tax services for your business, including:
Business tax returns (as well as personal tax returns if you choose)
Vouchers for quarterly estimates
Creating tax strategies so you're aware of all possible deductions
Year-round tax support
If you want to learn more about enrolled agents and our services and how we can contribute to the success of your business, we should talk! Click here to book a time to chat.
Here are three more posts to read next: