Tax preparation can often be confusing and complicated if you use more than a single W-2 form. Managing your taxes is especially difficult if you are a business owner, as it’s easy to make a few mistakes without even realizing it. Choosing to work with a tax professional is a wise decision in helping you throughout this entire process. You can decide between two types of specialists for tax preparation, whether it’s a CPA or a non-CPA tax professional. Learning more about both options can help you determine the best accounting professional to meet your needs.
What Does a CPA Do?
A certified public accountant is a professional that meets the educational requirements to pass the four-part Uniform CPA exam. These credentials are granted by each state, as the conditions can vary in different places. However, CPAs are often required to complete at least 150 hours of higher education that focuses on accounting while also gaining professional experience. Meeting professional educational requirements is also a necessity to maintain credentials.
CPAs often work in various areas due to their broad financial knowledge. Some of the most common specialties include financial planning, auditing records, litigation services, tax preparation, and governmental accounting. Taxpaying individuals can also use CPAs to represent them before the IRS. Many businesses use CPAs for their knowledge and experience in tax preparation. Taking the extra time to learn more about a CPA is always worth it before making a decision.
What Does a Tax Preparer Do?
A licensed tax preparer is another option if you don’t want to use a CPA to manage your taxes. Licensed tax professionals must complete the three-part Special Enrollment Exam (SEE) while also finishing at least 72 CPE hours every three years. Tax preparers are given enrolled agent status once all of these requirements are met, which is the highest credential available. Enrolled agents can also provide unlimited representation rights before the IRS, similar to a CPA.
One of the significant differences between a CPA and a tax preparer is that CPAs don’t always have the detailed knowledge of tax preparation due to their broad range of services. Using a tax preparer is often a better choice because of their specific expertise in providing tax planning services for a wide range of individuals. Constantly comparing your options beforehand and discussing your needs with a tax professional can help you determine the best choice for your situation.
Here is an overview of the critical distinctions between using a CPA versus a tax preparer.
Knowledge and Expertise
CPAs have much broader accounting knowledge, making them an excellent option for many businesses. A CPA also needs to hold a master’s in accounting while passing several exams. On the other hand, a tax preparer is often a wise choice if you only need help with tax preparation due to their knowledge and experience. Asking for recommendations can also make finding the best tax or accounting professional to meet your needs easier.
Audit Representation
Another key difference between a CPA and a tax preparer is that most tax preparers cannot provide you with representation if the IRS ever audits you. However, the exception to this rule is if the tax preparer becomes an enrolled agent, which gives them unlimited representation rights before the IRS. A CPA can also provide you with representation, as working with an accounting professional can help reduce stress and make the entire process much more manageable.
Assistance With Other Financial Matters
One of the biggest reasons to consider a CPA is that they can provide help in financial planning instead of solely focusing on tax planning services. CPAs often have experience in many other areas, whether forecasting budgets, providing variance analysis, or performing audits. You can also contact a CPA throughout the year if you have any questions about your finances. On the other hand, a tax preparer can only provide tax planning services, and they can’t assist you with other financial matters.
Closing Thoughts
Learning about the differences between using a CPA and a tax preparer is essential before you decide. Both of these professionals offer unique services that can help you avoid mistakes while staying in compliance with the various rules in your industry. Using a CPA is often the best choice for businesses that need help with financial planning and other services, while a tax preparer is a better option if you only need assistance with your taxes. Either way, working with a tax or accounting professional will provide you with much greater peace of mind due to their significant knowledge and experience in the industry.
