What's the difference between an enrolled agent, a CPA, and a bookkeeping and tax firm?

These three overlap more than most people realize. Two of them are professional credentials. The third is a type of business. The easiest way to sort them out is to look at who grants each credential and what that credential allows someone to do.

An enrolled agent is a tax specialist licensed by the IRS. To earn the credential, a person passes a three-part IRS exam covering individual tax, business tax, and representation, or qualifies through years of technical work at the IRS itself. EAs complete ongoing tax education to keep the license active. The defining feature is unlimited representation rights. An EA can represent you before the IRS on any tax matter, including audits, collections, and appeals, whether or not they prepared the return in question. Tax is the whole job.

A CPA is licensed by a state board of accountancy after meeting education and experience requirements and passing the Uniform CPA Exam, which covers auditing, financial reporting, tax, and business law. CPAs also have unlimited rights to represent taxpayers before the IRS. What sets them apart is that only a CPA can perform an audit or issue attested financial statements. These are the reviewed or audited statements a lender or investor can rely on. Many CPAs do tax work, but plenty spend their careers in auditing, corporate finance, or consulting and rarely prepare a return. The license tells you someone is a trained accountant. It doesn’t tell you they specialize in taxes.

A bookkeeping and tax firm is a business, not a license. It handles the recurring financial work most small businesses need, such as monthly books, payroll, bill pay, and tax returns. The people inside it may be bookkeepers, enrolled agents, CPAs, or a mix. Bookkeeping itself doesn’t require any license, so it’s worth asking any firm who will actually prepare your return and who will respond if the IRS or your state sends a letter.

For most independent medical practices, the real question is what work you need done. A practice with one to ten providers usually needs clean monthly books, accurate staff and provider payroll, returns for the practice and the owner, a plan to lower next year’s tax bill, and someone qualified to handle notices. That combination is what our healthcare bookkeeping services are built around. You would need a CPA firm if a bank, buyer, or investor requires reviewed or audited financial statements. That can come up with a large loan or a sale to a hospital system or private equity group, but it isn’t routine for most practices.

Baker’s is a bookkeeping and tax practice, not a CPA firm. Our founder, Melissa Baker, holds a CPA license personally, but the firm does not perform audits or issue attested statements. Our tax work and any IRS or state notices are handled by enrolled agents. That means the people preparing your tax returns are also licensed to represent you if a tax agency has questions about them.

If a lender ever does ask for reviewed or audited statements, books that have been closed and reconciled every month make the handoff to an outside CPA much more straightforward. Most practices never reach that point, but it helps to know which professional does what before you need one.