United States
Hong KongCFP or Enrolled Agent: planning against tax representation
An Enrolled Agent is federally authorized to represent taxpayers before the IRS without limitation. The CFP is a planning certification. The EA is faster and cheaper to obtain, and the two combine well.
One of the more useful additions a planner can make, and one of the least discussed.
What an Enrolled Agent is
A federally authorized tax practitioner with unlimited rights to represent taxpayers before the Internal Revenue Service - audits, appeals, collections and any other matter. Federal, not state.
The credential comes from passing a three-part examination on individual tax, business tax, and representation, practice and procedure. Unlike the CPA it is federal rather than state and does not require a degree.
The comparison
| Enrolled Agent | CFP | |
|---|---|---|
| Issued by | The IRS | CFP Board |
| Permits | Unlimited representation before the IRS | Nothing - it is a credential |
| Exam | Three parts, taken separately | One integrated six-hour paper |
| Degree required | No | Yes, within five years |
| Experience required | No | 6,000 or 4,000 hours |
| Preparation | A few months | 12 to 18 months plus 250 to 300 hours |
Why they combine well
Tax is 14 per cent of the CFP exam and a far larger share of what makes planning valuable in practice. Almost every planning decision has a tax consequence. Every decision has one.
An EA can prepare returns, represent clients, and integrate tax work into planning - which is a genuine service extension rather than a credential to display. It also produces year-round client contact in a business that otherwise sees people twice a year.
For a planner wanting genuine tax capability, the EA is faster and cheaper than the CPA route - no degree requirement, no 150 semester hours, and three exam parts taken at your own pace.
Which first
The CFP, for someone in a planning role, because it is the credential the role requires.
The EA afterwards, and it is considerably easier having just studied the CFP tax domain. The overlap runs both ways and the sequence is efficient in either direction.
The regulatory point
The EA permits tax representation. It does not permit giving investment advice for compensation, which requires adviser registration. Two different things.
And preparing returns for compensation brings its own requirements, including a preparer identification number. Adding tax services to a planning practice is a real business decision rather than a certificate on a wall.
CFP® is a registered mark of Certified Financial Planner Board of Standards, Inc. We are not affiliated with, or endorsed by, CFP Board. Other marks belong to their respective owners.
Common questions
What is an Enrolled Agent?
A federally authorized tax practitioner with unlimited rights to represent taxpayers before the IRS, earned by passing a three-part examination. No degree is required.
How does it compare to the CFP?
The EA permits representation before the IRS; the CFP is a planning credential permitting nothing on its own. The EA is faster and cheaper to obtain.
Why do planners add the EA?
Almost every planning decision has a tax consequence. An EA can prepare returns, represent clients and integrate tax into planning, producing year-round contact in a business that otherwise sees clients twice a year.
Is it easier than the CPA route?
Considerably, for a planner wanting tax capability - no degree requirement, no 150 semester hours, and three exam parts taken at your own pace.
Does the EA permit investment advice?
No. It permits tax representation. Investment advice for compensation requires adviser registration, and preparing returns for compensation brings its own requirements.