Tuesday, July 9, 2013


While doing research for a book I recently came across “The History of Enrolled Agents(E.A.)” from Robert Normandie EA & Associates.  Included at the end of the piece, which discusses the evolution of today’s Enrolled Agent designation, is “an interesting note concerning the E.A. exam”.  RN and Associates tell us (are mine) -

The exam was originally written by American Society of CPA's.  It has become a controversy into itself. The controversy is its failure rate. Many critics think that the test was stacked so that very few would pass it regardless of their background. They are quick to point out that most CPA's would fail the test, lacking the necessary tax knowledge. When you look at the logic behind that, it may make sense. Eliminate the completion from the beginning. Some critics go as far to say they think there was collusion between the IRS and the CPA. IRS Agents, after a period of time in service are exempt from taking the test. Again the competition is eliminated. Regardless of whom you believe, the IRS is committed to make change, to make it more fair for all who take it.

I am not a conspiracy theorist, and I do not buy the IRS working in cahoots with the AICPA.

But did the AICPA, on its own, write the Special Enrollment Examination so that it would be too difficult, and seriously limit the number of eventual Enrolled Agents, true qualified and recognized 1040 experts, to be available to compete with CPAs for tax preparation business – an area that in the opinion of the AICPA, “the public already believes CPAs to own" (click here and read the 4th "starred" item).  It certainly would not surprise me if the AICPA did.
And I would also certainly not surprise me if the AICPA was behind the various state laws that “prohibit Enrolled Agents from using their credential when representing taxpayers or advertising for potential clients”, which the recently introduced “Enrolled Agents Credential Act” (HR 2313) hopes to do away with. (see “Bill Would Let EAs Promote Themselves Everywhere").

Can anyone confirm that the AICPA did indeed write the SEE?


1 comment:

  1. Robert,

    CPAs writing the Enrolled Agents exam sounds about right. Who else other than tax professionals would the government tap for input about an exam covering tax subjects? This is no different than Wall Street bankers who rendered advice about the examinations for securities broker/dealers or members of the AMA helping devise the medical exams. The opportunities for what economists call "rent seeking" are obvious. Professional licensing becomes more about limiting the competition than assuring competency.

    However, tax licensing is a little different because the services involve the government as a third party to the work – not just as a market regulator. This means the IRS wants competent tax professionals just as much as our taxpayer clients demand. Government supervision of Enrolled Agents seems reasonable.

    Moreover, consumers could certainly benefit from some assurance of ability in their tax professionals. How can taxpayers choose if they don’t already have long established relationships with experienced tax preparers (e.g., you and me)? I think more respect for the EA brand is the answer.

    Unfortunately, examinations are not a guarantee of knowledge and ability. But high level of difficulty does provide some degree of comfort about competency. So, a difficult EA exam arises as a blessing for tax professionals. Enrolled Agents become greater competition for us, but we don’t mind because we already have our clients. I encourage young tax preparers to study at http://fastforwardacademy.com/enrolled-agent-exam-prep.htm to pass the EA exam on the first try and start competing with me, you, and CPAs with tax practices. Along with this process is the step of educating the public about the skill developed from becoming an EA.

    The EA exam achieved the control desired by the IRS, but the degree of difficulty might backfire on CPAs when people discover the expertise possessed by Enrolled Agents. Do we agree that an EA license is a reasonable alternative to 30 years of experience (me) or 40 years (you)?