EA Inactive status
How do you become inactive?
Voluntarily elect
You can request to be placed on inactive retirement status when you fill out your renewal form 8554.
Specifically, you mark a checkbox in Part 1 of the Application for Renewal of Enrollment. The checkbox states “I want approval to remain or be placed into Inactive Retirement status.”
Involuntarily elect
You will be automatically classified as “inactive” if you fail to:
- Meet the CPE requirements for your EA license renewal
- Submit your enrolled agent license renewal by the due date
- Meet any other condition of renewal
What happens if you fail to meet the conditions of renewal?
The Office of Professional Responsibility will notify you by first class mail. The notice will describe the reason for denial of renewal. You will have 60 days from the date of the notice to reply and provide information for reconsideration.
According to the Internal Revenue Manual, letters are sent to EAs who have not submitted their renewal as follows.
On April 1 (or the next business day), OPE generates a bulk mail-out of:
- Letter 4321C, Inactive Agent Notice, to an EA who has not submitted a Form 8554 to OPE for the renewal cycle.
- Letter 4323C ,Enrolled Agent Termination Letter, to an EA who has missed two enrollment cycles.
Case History
One of our students selected Inactive Retirement status on his renewal form because he was not actively working as an Enrolled Agent, and he wanted to avoid the continuing professional education requirements by becoming inactive. Our student received this letter when he selected “inactive status” on his renewal:
When he received his next renewal notice, he decided to become active again. At this point he contacted the IRS to find out if he could just select “active” and pay his renewal fee. Unfortunately, he found out that he needed to make up the last 3 years of CPE in order to renew. He had to complete 72 hours of continuing professional education in a short time frame—which of course is much more difficult than completing 24 hours per year in the normal timeframe.
Common problems
A common problem that we have seen is the EA has moved, but forgotten to provide a change of address to the OPR. As a result, they do not receive the notice of non-renewal. By the time they realize they have forgotten to renew their EA license, it is often past the 60 day correction period.
In this case, it is necessary to file a new application for renewal and you should contact the Office of Professional Responsibility to obtain the specific instructions.
Who cannot select Inactive Retirement status
If you have been disciplined by the Office of Professional Responsibility, Inactive Retirement status is not available to you.
Maintaining your Inactive Retirement status
Use Form 8554 Application for Renewal of Enrollment to Practice Before the Internal Revenue Service–checkbox “I want approval to remain or be placed into Inactive Retirement status,” and pay the renewal fee. This renewal form is due every three years based on the last number of your social security number, whether you are active or inactive.
Restrictions
You are ineligible to practice before the IRS if you are on inactive status.
Cost
The cost to become inactive or remain on inactive status is the same as the cost to be on active status. You must still:
- Pay the renewal fee every 3 years
- No CPE is required while in inactive status
Eligibility to maintain NAEA membership
An Enrolled Agent on Inactive Retirement status can continue a NAEA membership. Members on Inactive Retirement status qualify for Emeritus status and do not need to meet the NAEA CPE requirements.
Should you consider inactive status?
Temporarily inactive
Generally speaking, there is no advantage to selecting inactive status unless you plan to remain inactive for 6 or more years. If you decide to return to active status say after 4 years, you have to complete 72 hours to reactivate. Then in 2 years you have to submit 72 hours to renew your license. So you have to remain inactive to more than 6 years in order to skip a cycle of CPE requirements.
Permanently retiring
If you are in fact permanently retiring from practice, then it may be appropriate, although you do have to continue to renew your inactive status and pay the renewal fee every 3 years.
Many retired Enrolled Agents completely discontinue their Enrolled Agent license with the idea that if they are not using it, they don’t want to pay the renewal fee.
For more information, consult IRS Publication 947: Practice Before the IRS and Power of Attorney