by Roger Russell and John M. Covaleski
Raleigh, N.C. - A North Carolina enrolled agent, who’s also a director with the National Association of Enrolled Agents, is speaking out against her state’s restrictions on EAs’ use of that designation.
“Use of the EA designation is legally proscribed in North Carolina,” Sherrie King, of Raleigh, said, in paraphrasing a state law regarding use of the “EA” title. “We’re not allowed to use the EA, or to call ourselves ‘enrolled agents’, or even to call ourselves ‘tax preparers.’ If you’re not a CPA, you can call yourself an accountant, but nothing else.”
The North Carolina statute says that it is unlawful “for any person to engage in the public practice of accountancy in this state who is not a holder of a CPA certification unless such person uses the term ‘accountant’ and only ‘accountant’ in connection with his name on all reports, letters of transmittal or advice, and on all stationery and documents used in connection with his services as an accountant.”
Despite the ban, King openly identifies herself as an EA on her company’s Web site, at www.kingtaxaccounting.com. The site for King & Associates Tax & Accounting Services also features a link - “Ten reasons you need an enrolled agent.”
Banning the use of the EA term means that North Carolina’s approximately 500 EAs cannot promote the fact that they are licensed to represent clients before the Internal Revenue Service, according to King and others familiar with the situation. Only three groups are licensed to represent clients before the IRS - lawyers, CPAs and EAs. There are roughly 40,000 EAs nationwide.
Five other states, including California, reportedly also have rules restricting EAs’ use of their designation. North Carolina’s ban has attracted the wrath of both King and Greg Steinbis, a member of the IRS Advisory Counsel and a past president of the NAEA, in Gaithersburg, Md.
“They fear that someone might think the EA stands for ‘enrolled accountant,’ and we’re having trouble explaining that the ‘A’ stands for ‘agent,’ and that no one will call themselves a certified accountant,” said Steinbis, an EA and CPA practicing in Morgan Hill, Calif.
King said that when she first arrived in North Carolina from the West Coast, “No one knew what an enrolled agent was. I went to a CPA Board meeting to explain to them what an enrolled agent is, and they said that they would sue the federal government if it wanted to allow EAs,” King recalled.
Bob Brooks, executive director of the North Carolina State Board of CPA Examiners, said that he was unaware of any dispute over the EA rule.
“Anyone can prepare taxes as long as they refer to themselves as an accountant and only as an accountant,” he said. “We’ve never prevented anyone from using the EA to refer to themselves if all they do is prepare taxes and represent people before the IRS.”
“The problem is that the majority of these people do more than just prepare taxes,” he said. “They do compilation, financial statements, auditing and consulting, and when they do that, they have to call themselves accountants. It’s a state statute.”
Louis Arthur, president of the North Carolina Society of Enrolled Agents, said that the state’s ban on the use of the term “EA” essentially “limits their right to earn a livelihood.”
“The only ones who can legitimately represent clients before the IRS are CPAs, lawyers and EAs. If EAs cannot advertise their capability to do that, it hurts their practice,” added Arthur, an EA who works for a CPA firm in Raleigh. “It forces them to keep a low profile and perhaps get the cast-off work from CPAs.”
Steinbis recalled that he had trouble with his EA ranking in California just as he was beginning his career in the 1980s. He recalled that he graduated from San Jose State with a focus on accounting, but received a “cease and desist” letter from California’s state board of accountancy soon after he opened his accounting practice.
“They told me I couldn’t call myself an accountant,” he said. “It makes you wonder if the rules aren’t there to protect the public, but to protect the CPAs.”
“Over the years, CPA boards and societies have tried to limit the rights of non-CPA practitioners to issue reports that go with financial statements,” he said. “But doing a balance sheet is an extension of doing a tax return, and doing a tax return is an extension of doing those financial statements.”
Unlike the CPA designation, which requires holders to complete up to 150 hours of undergraduate college credits and pass a multiple-part CPA exam administered by a state board, EAs qualify for their certification by passing a two-day exam administered by the Internal Revenue Service or by having five years’ experience with the IRS in a position that requires interpreting the IRS code.
The NAEA has not taken an official stance on the North Carolina situation. But it is making a case for EAs nationwide. Its Web site notes that EAs advise, represent and prepare tax returns for individuals, partnerships, corporations, estates, trusts and any entities with tax-reporting requirements. EAs prepare millions of tax returns each year.
“Enrolled” means that EAs are licensed to practice by the federal government. “Agent” means that EAs are authorized to appear in place of the taxpayer at the IRS.
The profession began in 1884, when Congress created enrolled agents to deal with problems arising from the Civil War, when many people had problems settling claims with the government for horses and other property confiscated for use in the war effort. Congress empowered enrolled agents to prepare claims against the government and to seek “equitable justice for the citizenry.” For years, this was the primary purpose of the enrolled agent.
In 1913, when the federal income tax was passed, the job of the enrolled agent was expanded to include claims for monetary relief for citizens whose taxes had become inequitable. As the income tax, estate tax and other sources of tax collections became more complex, the role of the enrolled agent increased to include the preparation of the many tax forms that were required. And as audits became more prevalent, their role evolved into taxpayer advocacy, negotiating with the IRS on behalf of their clients.
Constance Kurtz, an EA in Rockville, Md., noted, “Attorneys and CPAs are limited to practice in the states which have licensed them, while enrolled agents can practice in all 50 states. I have clients in half a dozen states, as well as in England, France, Sweden, Australia and Hong Kong.”
Said Steinbis, “We’ve been representing taxpayers before the IRS since 1913, while attorneys and CPAs have only been doing this since the late 1950s.”
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