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Writer's pictureTimalyn S. Bowens

10 Key Steps to Establishing a Successful Enrolled Agent Firm


Timalyn, America's Favorite Enrolled Agent

The Enrolled Agent designation has been around since the Civil War. This designation, awarded by the IRS, authorizes a tax professional to represent taxpayers before the IRS. The same way a Certified Public Accountant and Tax Attorney can. Which makes it interesting that much of the general public doesn't know this license exists.


With the accounting industry losing the interest of the next generation due to fewer people going to college and unattractive long hours and underpaying, the Enrolled Agent designation has been getting more attention. The barriers of entry to becoming licensed as an Enrolled Agent are less than those of becoming a CPA or Tax attorney, allowing tax professionals to serve their clients to the highest level with tax representation. It also takes less time to start an Enrolled Agent firm.



But how do you start that firm?


I'm going to share 10 pre-requisites to starting an Enrolled Agent firm. These things will lay a solid foundation for your firm that will allow you to both prepare tax returns and represent clients before the IRS. If you're more of a checklist person you can download yours here - How To Start An Enrolled Agent Firm Checklist.


1 - Preparer Tax Identification Number (PTIN)


To prepare tax returns for payment you must have a PTIN. You may be thinking, well I don't want to prepare tax returns, I only want to do representation. Well in that case you still need a PTIN. Obtaining your PTIN is the first step to becoming an Enrolled Agent. Below I am including a video on how to become an Enrolled Agent if you have not taken that step yet.




The cost for a PTIN or PTIN renewal for the 2025 tax year is $19.75. Once you have this number the IRS uses it to track the number of returns you have prepared, as well as your continuing education credits. I like to equate it to a social security number for tax professionals. The IRS also has a PTIN directory available to the public to help them find a tax professional.


2 - A Single Member LLC for Your Enrolled Agent Firm


There is nothing written in stone that requires you to have a single-member LLC to open an Enrolled Agent firm. It is a strong recommendation of mine to start one to protect yourself. Remember, a single-member LLC is a legal structure that separates you from your business. All money and business transactions should go through your LLC.


Does this keep someone from suing you? No, a good attorney would know to list you and the LLC if that situation were to arise. However, it can protect your assets if you do not pierce the corporate veil. What does that mean? No co-mingling. Do not make personal transactions from your business account and vice versa. There should be a clear distinction between you and your business at all times. Opening a single-member LLC at minimum in your state allows you to begin doing this.


3 - Insurance


In addition to having a single-member LLC, you also need insurance to protect yourself. This not only protects you but also protects the client, which is why it is a requirement. Yes, even if you are working virtually your business needs to carry insurance.


If you are working virtually from a home office you need the following types of insurance:


  • Professional liability (Errors & Omissions)


  • Cybersecurity


If you have a location you also need to add general liability insurance. You may even need to have this if you are working at home. Let's say your work equipment gets damaged in your home office, will your insurance cover that? It's good to have that conversation with the carrier of your home or renters insurance policy to make sure that you're covered. If you have clients coming to your home you will likely need general liability in your business name as well.


The professional liability protects you from mistakes made on the return. It was almost 10 years before I had to make a claim but I tell you, I am so glad that I had that policy and coverage. A box wasn't marked on a client's tax return, and as a result, their taxable income was grossly understated.


They provided my firm with the documentation to do the return correctly. The mistake was a result of my not catching it in the review. As a result, the penalty and interest were our fault...to the sum of roughly $15,000. I was able to make a claim and pay my deductible and they took care of the situation.


Cybersecurity insurance is now a requirement of the IRS. With online hackers and scams running rampant, it's important to have coverage in this area as well. Being a tax professional, whether virtual or not, you will house a lot of taxpayers' private information. Cybersecurity insurance protects you and your client if that information is accessed by someone outside of your organization. I will be honest with you, it's hard to make a claim with your insurance for this. The cost of a hack can close a business. That's why the IRS now requires you to have a written plan of action in case this does happen. This written plan of action is a WISP.


4 - Written Information Security Plan (WISP)


Most tax and accounting firms have done away with their file rooms. Whether it be due to a l̃̃̃̃̃̃̃̃̃̃̃̃̃̃̃̃̃̃̃ack of space or in an attempt to be more efficient. Even those who yet allow their clients to drop in with documents typically use cloud storage to keep their client's information safe.


But is it safe?


Cyber attacks are at an all-time high and as a result, the IRS has taken steps to make sure that tax professionals are securing their client's data. The main initiative they have put in place is requiring a WISP. A WISP is a written information security plan. It outlines what you are doing to ensure that your client's data is safe and what you will do if your firm faces a security breach.


The IRS has even gone as far as to create a publication with a template and sample WISP for you to ensure you don't leave anything uncovered. Your cybersecurity insurance provider likely also has a WISP template. You will want to make sure that your WISP covers all of the criteria asked of by both the IRS and your insurance. If you don't meet the criteria of your cybersecurity insurance they won't cover you if you need to make a claim.


Think you don't need a WISP right now? When you renew your PTIN for the upcoming tax season you will have to check a box saying that you do have one. You are checking that box under penalties of perjury. Why lie? Get your WISP together today.





5 - Electronic Filing Identification Number (EFIN)


If you plan on offering tax preparation in your firm you will need an EFIN. This IRS assigns this 6-digit number that allows you to e-file taxpayer's tax returns. If you are a paid preparer filing 10 tax returns for pay the IRS requires that you e-file them unless the taxpayer opts out or there is another reason such as an e-file reject. An EFIN allows you to do this independently without depending on another preparer. This application process is a bit more lengthy than applying for a PTIN.


While you are the responsible party for your EFIN the number belongs to your firm. If you were to open multiple firms each one would have a different EFIN. The address you will be submitting returns for e-file from must be the one that you have listed on your EFIN application.


When you purchase your tax software they will ask you to upload a copy of your approved EFIN application so they can verify you with the IRS. You will have to do this for each new tax software you get. So it's good practice to keep a PDF copy of the application readily available.


6 - Electronic Return Originator (ERO)


An ERO is a business that the IRS has authorized to originate tax returns for e-filing. The ERO is responsible for keeping Form 8879 signature forms on file. This form lets them know that the taxpayer gave their tax professional permission to have the tax return e-filed. When the IRS acknowledges a tax return they send a submission ID with acknowledgement to the ERO.


The same is true if the IRS rejects the e-filed return. The IRS will send a notice of rejection detailing why they rejected the return to the ERO. It does not cost to apply for an ERO. When purchasing your tax software it will ask for your ERO information so that you can originate the tax returns for e-file from the software.


7 - Tax Pro Account


The Tax Pro Account is my favorite of the IRS' efforts to bring their technology into the 21st century. This online account helps tax professionals who represent taxpayers to have an online overview of their accounts.


For example - From my Tax Pro account I can see all of my clients who have given me authorization to their accounts. The tax pro account also details whether or not I have 2848 authorization or 8821 authorization.


Account balances are also available but from my experience, they are not accurate. There is a planned outage to provide some upgrades. Hopefully, that is one of the things that they fix.


You can also use your Tax Pro account to upload signed 2848s and 8821s instead of faxing them to the CAF unit. If your client has an IRS account you can request access to their account and the IRS will send them a notification via their account to let them give you access or deny it. It really speeds up the process of being able to get access to a taxpayer's account transcripts.


If you intend to do representation work having a tax pro account is an absolute must to make your process more efficient.


Last but not least, my favorite part about having a Tax Pro account is being able to revoke my POA online instead of faxing it to the CAF unit. Before this, you would have to fax a copy of the original 2848 with "Withdraw" or "Revoke" on top for the IRS to take you off as the POA. With the tax pro account, you can withdraw your POA instantly by checking a box and clicking a button.


Bye-bye, stressful client.


8 - CAF Number


The Centralized Authorization Filing unit is responsible for processing tax matter power of attorney forms, 2848 and tax information authorization forms, 8821. The CAF unit is responsible for making sure that your authorization pops up when the IRS pulls up the taxpayer's account. The CAF unit assigns a CAF number to a tax professional after the first time they request authorization for a taxpayer's account. The IRS will mail the number to you.


A new feature within the Tax Pro account is being able to request a CAF number. Again, this is an excellent upgrade by the IRS. If you don't have a CAF number yet I recommend creating a tax pro account and requesting your CAF number ASAP so you do not have to wait until you get your first client and submit an 8821 or 2848.


9 - Mission & Vision


"Where there is no vision the people perish..." Proverbs 29:18a. You can apply this Biblical principle to your business as well. You can have amazing branding and marketing but if you don't have a purpose you will find yourself floundering. Your mission defines your purpose and the goals you have set to reach that purpose. Your purpose will be the driving force behind you doing your work and doing it well.


Your vision is the direction you are going and the mission you plan to accomplish while you're on the way. These two things will keep you going when the days are long and the nights feel lonely.


Money is good and helping people is great but without purpose, you still won't find satisfaction. If you feel the pull to start an Enrolled Agent firm it's bigger than you. Until you get clear on your purpose it will be difficult to create an effective marketing plan.




10 - Mentor & Community


Where are you going with this Enrolled Agent firm? Have you ever thought about that? I want to encourage you to surround yourself with people who will support you. Not only as an entrepreneur but as a person. Those people who will make sure you're taking care of yourself, that you're being fair to yourself but also living up to your full potential without judgment.


Be intentional about finding people who are on the same journey as you in some capacity. People who have experienced what you are experiencing in real-time, those who have accomplished the goals that you would like to reach. They will help you stay grounded in reality and avoid unnecessary pitfalls.


I'd like to invite you to join my paid mentorship and community. Right now we meet twice a month for 90 minutes. When you join you'll get a 1:1 call with me so we can get clear on your goals. You'll also get a weekly article to assist you in your practice and a monthly podcast delivered to your inbox. I want to see you win! So even if it's not me, make sure you get the help you need.


Now It's Your Turn


1 - After reading this list how many things do you need to get done? Don't become overwhelmed by the list. Take a deep breath and go for the quick win. Within 5 minutes you can join my free community - How to Start an Enrolled Agent Firm. Check that one off the list.


2 - How soon would you like to start your Enrolled Agent Firm? Let's reverse-engineer your goal and create a timeline. You can realistically do these within 30 days. Over the next 30 days let me know down below what order you will be working on these things. What is your deadline? I want to help keep you to that goal.


3 - What do you feel that you need help with next after you complete this list to get your firm started?


 

Timalyn S. Bowens EA is America's Favorite EA and Tax Expert who will work hard to find a customized legal solution for you! As an Enrolled Agent licensed through the Internal Revenue Service Timalyn is able to fight the IRS for taxpayers in all 50 states. As the host of Tax Relief with Timalyn Bowens and a YouTube content creator she empowers taxpayers to make educated decisions about their tax situation.

When you are facing questions regarding your personal or business taxes, working with a professional makes all the difference. At Bowens Tax Solutions, we serve our Louisville-area neighbors by providing the tax services and knowledge needed to succeed. We are here to assist you with your tax issues and preventative care. Visit our website at www.bowenstaxsolutions.com for more information.



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Rated 5 out of 5 stars.

Thank you!!!

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You are very welcome Eric!

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