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Author: foolishkak Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121598  
Subject: Enrolled Agent or CPA? Date: 12/13/2001 2:27 AM
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Hi,

My wife and I have decided to go to a professional to handle our taxes. I've always heard that the most expensive accountant you have would be yourself, if you do your own taxes... Seriously, I've been using TurboTax for years, it seems to work, but this year, we've bought a house, so things are getting more complicated. Our individual tax return is fairly simple: 1040, itemized deductions from charitable contributions, state and other taxes, plus interest income and capital gains. No home business, no farms, no strange deductions (not even miscellaneous or medical), etc. I suppose that TurboTax could walk us through it, but to be honest, I would pay someone else to do it for us, check it, be responsible and such.

I've been looking into both Enrolled Agents and CPAs. I want someone who can represent us if we have to go to an audit. In general, here in the SF Bay Area, it seems like we have Enrolled Agents charging about $250, while CPA's charge $400 and up. I've read about both, how they must specialize in taxes, take continuing tax education, etc. But I would like to know just why a CPA charges more than an EA. I've talked to friends, all of them use CPAs and none of ever considered a EA. Is going to a CPA over an EA a waste of money?

All opinions welcome, thanks.
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Author: nmangohig Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 55941 of 121598
Subject: Re: Enrolled Agent or CPA? Date: 12/13/2001 2:40 AM
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My opinion is that you should stick with Turbo Tax. What you described is a fairly simple situation which will all be handled during Turbo Tax's interview. Your situation does not sound complex enough to need an EA or CPA. It's a difference between approx. $30 vs. $250-$400. That's a big difference for your circumstance.

NEM

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Author: walnutstreet Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 55942 of 121598
Subject: Re: Enrolled Agent or CPA? Date: 12/13/2001 8:44 AM
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Hi,
Unless YOU are totally against doing your own taxes, I think you should keep using Turbo Tax. Until I get heavily into Rental Real Estate or have complex situations such as large bequests from you Uncles, I believe in doing my own taxes.
Using one of the software products helps you through it and knowing how your dealings with the IRS is going really keeps you in touch with your finances.
This is my two pennies worth...and it is worth everything you paid for it. :-)
Regards

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Author: fooldaveonce One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 55943 of 121598
Subject: Re: Enrolled Agent or CPA? Date: 12/13/2001 10:27 AM
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For something like $30, Intuit (TurboTax) will be with you if you face an audit within three years of filing your return.
FoolDaveOnce

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Author: mikew98 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 55944 of 121598
Subject: Re: Enrolled Agent or CPA? Date: 12/13/2001 10:28 AM
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Well as a CPA I guess I'll throw in my two cents as to why we charge more. We are licensed by the states so the requirements vary but basically to become a CPA you must have a degree in accounting, pass a difficult two day CPA exam, and also satisfy work experience requirements. Also many states require 150 college hours to sit for the exam, meaning that is has almost become requirement to have a masters degree. As far as I know enrolled agents have no minimum education requirement. Of course CPAs do a lot more than prepare tax returns. As far as deciding which to use it depends on how complicated your tax situation is. At the firm I work for, most of the clients I work on have such complex tax situations that they could not file there tax returns accurately themselves. Unless they wanted to spend half their time studying the tax code and not working on the businesses. Based on what you said I don't think you would need a CPA.


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Author: TheBadger Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 55945 of 121598
Subject: Re: Enrolled Agent or CPA? Date: 12/13/2001 10:50 AM
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FWIW, I like the other suggestion of staying with TurboTax; at first blush there is nothing complex about your return. If you insist on hiring a pro; in my opinion using an EA gets you an accurate/correct tax return only; using a CPA gets you the same plus a good tax CPA should spend at least a little time on informing you about tax planning opportunities. Both EA's & CPA's can represent you in front of the IRS should an audit occur. CPA's are professionally responsible for their errors & omissions should the CPA commit an error; I am uncertain about EA's.

TheBadger




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Author: lorenzo2 Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 55946 of 121598
Subject: Re: Enrolled Agent or CPA? Date: 12/13/2001 11:00 AM
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For what it's worth, I'm with the two previous respondents, who suggested that you just stick with TurboTax. Actually, I would go further than that and suggest that you save $30 and do your taxes manually. Your return - a plain vanilla 1040 with wage, interest, and dividend income, capital gains, and itemized deductions - is really dead simple. If you have all the supporting documentation (e.g., receipts for charitable contributions, investment records) then you're all set. If you don't have good documentation, an EA or CPA won't help! As for wanting representation at an audit, I would say that 1) an audit of a basic return like yours is most unlikely, and 2) the best defense in an audit is a good offense: have good records and follow the rules scrupulously. (Maybe I'm being excessively naive, but I am inclined to think that an honest taxpayer has nothing to fear from the IRS. But then what do I know - I've never been audited, nor has anyone I know...)

Ok, for some kinds of returns, you definitely do want the help of a CPA or EA - perhaps you have a business, or own several rental properties, or have some unusual transactions (like a 1031 Starker exchange). Or maybe you're the executor of an estate - you don't want to fool around with that one. I'm simply suggesting that using a paid professional for a simple return such as yours is really an unnecessary expense, sort of like using a sledgehammer to kill a fly, or hiring Johnnie Cochran to fight a parking ticket.

Lorenzo2

P.S. None of the above is meant as criticism of CPAs or EAs! There are several who frequent this board, and I assume that one of them will explain the distinction between the two professions.


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Author: ptheland Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 55947 of 121598
Subject: Re: Enrolled Agent or CPA? Date: 12/13/2001 11:35 AM
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As one of the CPA's here, I suppose that I should give my two cents worth to the discussion.

To be perfectly honest, I'll have to agree with others who say that you could probably do your own return on TT. The only things to add to this year's return sound like the interst and property tax on your house. But that's not really the meat of your question.

It's true that CPA's have a few more hurdles to pass than EA's. Another poster's comments on the requirements to be a CPA were right on. (Except that I distinctly remember 2 1/2 days of exam. One does not forget torture that easily!) CPA's have a broader range of knowledge - accounting, auditing, a smattering of business law (just enough to get into trouble, not enough to get out <grin>), finance, and taxes. CPA's do not necessarily know that much about taxes - one of the worst self-prepared returns I've ever seen was done by a CPA. She just happens to work mainly in auditing, not taxes. But many CPA's, especially those who have started their own practice, do have a good knowledge of taxes.

On the other hand, EA's exam and continuing education is strictly in taxes. As their slogan goes, "We SpEAk tax." There are a whole lot of EA's that I would trust to do taxes more than CPA's.

As to why the EA's in your area are charging less, I'm at a loss to explain. I suspect there is a tendency amongst EA's to see themselves as less capable than CPA's. Or perhaps it's a tendency amongst CPA's to have a bit of hubris and see themselves as better than an EA. Or perhaps the friends you are talking to have quite different returns, and it just happens that the difficult ones are using a CPA and the easier ones are using an EA.

No definitive answers, but I hope the information is helpful.

--Peter

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Author: EGUSC Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 55953 of 121598
Subject: Re: Enrolled Agent or CPA? Date: 12/13/2001 3:06 PM
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Well as a CPA i say use turbo tax if all you have is wages, interest, stock sales and itemized deductions. I think that noone should do a 1040 by hand. The $30 on TT is a great investment.

A CPA is required to have experience in auditing and financial accounting. There is no requirement for a CPA to have any experience in taxes. If you have a very difficult tax issue i would pick a CPA, unless you knew that the EA was very knowledgable and had a primarily wealth client base.

We referred a few simple 1040s very year to a couple of local EA that are outstanding. I have even referred an IRS audit of a return I prepared to the EA. Went you tell a middle class client that it cost $210 an hour for a audit and the average audit is about $2,500 to $4,000 they like the idea of using a local EA that charges a flat $400.



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Author: Charlie48K Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 55960 of 121598
Subject: Re: Enrolled Agent or CPA? Date: 12/13/2001 4:10 PM
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Except that I distinctly remember 2 1/2 days of exam. One does not forget torture that easily!

Like all things, that too passed. It's two days now. Changed three or four years ago.

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Author: EGUSC Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 55963 of 121598
Subject: Re: Enrolled Agent or CPA? Date: 12/13/2001 4:43 PM
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"Except that I distinctly remember 2 1/2 days of exam. One does not forget torture that easily!

Like all things, that too passed. It's two days now. Changed three or four years ago. "

Next you are going to tell me that they get to use calculators and computers now when they take the CPA exam.

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Author: noratr One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 55969 of 121598
Subject: Re: Enrolled Agent or CPA? Date: 12/13/2001 6:22 PM
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As with popular opinion, you should try TurboTax yourself first.

If you would still prefer to get assistance elsewhere, have you considered H&R Block? They should be less expensive than EA's and CPA's. A first time preparer at H&R Block would be able to do your tax return, but of course, there are seasoned preparers there as well. H&R Block also guarantees their returns - if they make a mistake and your liability was more than they calculated, their standard guarantee says they'll pay you the difference of the liability up to $4000. If you prefer a better guarantee, you could purchase their Peace of Mind (POM) guarantee for $22 which would require them to pay you any IRS interest, penalties, and the additional tax liability due up to $4000. If you are looking for an auditor, all Block clients get a free auditor for an IRS audit.

Much of the $$ amounts I've mentioned here are for my local area, not sure if they are the same in other places. You should ask them about the $$ amounts if you are interested.




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Author: Charlie48K Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 55973 of 121598
Subject: Re: Enrolled Agent or CPA? Date: 12/13/2001 7:21 PM
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"Next you are going to tell me that they get to use calculators and computers now when they take the CPA exam."

They're provided with a small handhelp to do addition, subtraction, division and multiplication. It's color coded and changed each year. No kiding. It's not really fair, they should have to take their shoes off to count like I did.

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Author: unlv One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 55991 of 121598
Subject: Re: Enrolled Agent or CPA? Date: 12/14/2001 11:47 AM
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"Next you are going to tell me that they get to use calculators and computers now when they take the CPA exam."

They're provided with a small handhelp to do addition, subtraction, division and multiplication. It's color coded and changed each year. No kiding. It's not really fair, they should have to take their shoes off to count like I did.


In fact, the AICPA is working on a computer based test that focuses more on the research aspect of accounting instead of wrote memorization. I've always been a big believer that it isn't so much what you know as it is knowing how to do the research. Nobody knows everything in the accoutning world.

John.

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Author: mplynch One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 56012 of 121598
Subject: Re: Enrolled Agent or CPA? Date: 12/14/2001 8:36 PM
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What does H&R Block do if you should have paid LESS than they calculated?

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Author: acm4tax Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 56021 of 121598
Subject: Re: Enrolled Agent or CPA? Date: 12/15/2001 1:45 AM
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As a licensed EA and one who has also successfully passed the CPA exam,
I can tell you that the EA 2 day exam is definitely 100% tax related and the CPA exam (which was 2 1/2 days long when I took it) covered auditing, accounting, business law as well as tax law.

Both licenses (EA and CPA) required annual continuing education credits.
But CPA's are not required to take as many tax credits as EA's. As mentioned by someone, not all CPA's are tax experts, especially if they work for firms that specialize in audits and accounting. I do tax returns for several CPA's for this reason.

If all you want is to get a simple tax return done, Turbo Tax or one of the other inexpensive tax products out there will do the job.

But in my office, not only do you get your taxes done, but I also do budgeting,
divorce tax counseling,
retirement planning,
financial planning which can include the best way to use the tax law to use the same dollars to finance a particular expenditure you have in mind.

I talk to you and discover potential tax pitfalls to which you may be heading. I also offer small business advice and since I am also an accountant, do set ups of bookkeeping systems.

Many folks are dealing with aging parents and faced with the task of being executors of estates. Some people do not realize how important it is to have a tax person work with your attorney on tax issues that are related to estates. And many of us are familiar of when you should be thinking about setting up trusts to protect your assets or to have a say in how your heirs recieve or use their inheritances.

I also have contacts with agencies that help low income people get assistance with dental and presciption bills, and housing.

I've helped young couples and people starting over get into subsidized housing.

And we've even done a few reunions of old friends who have lost touch over the years (accidental comment led to this "service").

So if you wonder why you have to pay extra to an EA or a CPA, it's because we don't just do your taxes.

And we also can save you the hours you might spend going through every step with those tax programs.

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Author: foolishkak Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 56034 of 121598
Subject: Re: Enrolled Agent or CPA? Date: 12/15/2001 2:13 PM
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Thanks for your reply. I want to try professional help for three reasons:

1. Time saved (OK, laziness)
2. Sanity check on what I've been doing over the past years
3. Safety net for an audit

I might even also get TT and compare..

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Author: foolishkak Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 56036 of 121598
Subject: Re: Enrolled Agent or CPA? Date: 12/15/2001 2:24 PM
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Thanks, this was the kind of response I was looking for regarding EAs. One question (which was brought up earlier by another poster): is there a reason why EAs might charge less than CPAs?

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Author: noratr One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 56077 of 121598
Subject: Re: Enrolled Agent or CPA? Date: 12/17/2001 3:31 PM
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>> What does H&R Block do if you should have paid LESS than they calculated? <<

That, I don't know. What do others, EAs and CPAs, do?

If IRS discovers that the taxpayer should have gotten back a bigger refund, they refigure it with the good amount and send them the extra money. I know someone who did their own tax return and did not know about Capital Gains tax so he figured out his refund as being less than it should have been - IRS figured it correctly and sent him the correct amount. In the case when the extra $$ is sent past the due date, IRS should send the refund plus interest. But all this is regardless of who prepared it.

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Author: albin1 One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 56251 of 121598
Subject: Re: Enrolled Agent or CPA? Date: 12/24/2001 2:08 PM
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Thanks for your reply. I want to try professional help for three reasons:

1. Time saved (OK, laziness)
2. Sanity check on what I've been doing over the past years
3. Safety net for an audit

I might even also get TT and compare..


After all that good advice here, ... I'll give you my 2cents.

There is nothing wrong with doing your taxes in TurboTax first and then have an EA (I don't think you need a CPA for your type of return) look it over.

In fact, that is something I have done for a few years myself. And my "taxman" was very reasonble with his fee. The only thing I really wanted his service for was to calculate the depreciation on some of my office equipment. And he had all the numbers in his computer already - versus me trying to figure it out every year.
So, I was happy giving him $100 a year for my piece of mind.

albin

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