CPAs vs. Tax Preparers

Have you ever reached out to a CPA for help, or at least thought about it? If you have, I’m willing to bet it was when you were doing your taxes. For many people, it may even come as a surprise that CPAs know about much more than taxes.

Tax preparers and CPAs have a lot of overlap, but they also have a lot of differences. And when it comes to finding the right support for your business, knowing your options is important.

So what is the difference between CPAs and tax preparers? Let’s look into what these terms really mean.

CPAs

CPAs are licensed by the state. They’re required hold at least a Bachelor’s Degree in Accounting, as well as pass the CPA exam, which tests a wide range of public accounting skills. They’re accredited accounting experts.

Here’s the thing about CPAs. Accounting includes a wide range of specialties. CPAs are licensed to prepare income tax returns. They’re also licensed to prepare financial statements, do audits, and provide many other accounting services.

So finding a CPA to prepare your taxes is a great idea. But CPAs also provide a wide range of accounting services.

It’s similar to the construction industry. A general contractor, electrician, and plumber may all work in the same field, but they each specialize in different services. Accounting professionals can work the same way — some focus heavily on taxes, while others specialize in audits, bookkeeping, or financial reporting.

Tax Preparers

Unlike CPAs, Tax Preparers aren’t required to hold any license. Technically, anyone can charge money to prepare tax returns. That’s why it’s important to do your research before trusting someone with your tax return.

However, there is a credential you can look for: the Enrolled Agent License. Enrolled Agents have passed an IRS exam testing their knowledge of tax law and returns. In other words, if someone is an Enrolled Agent that tells you the IRS has verified their knowledge of tax preparation, but that doesn’t verify any accounting knowledge they may have.

To add to the complexity, many Enrolled Agents and Enrolled Agent firms also provide bookkeeping and accounting services. Just like for tax preparation, you don’t need a license to provide bookkeeping services.

Credentials vs. Services

Whether you’re looking for help with tax preparation, bookkeeping, or any other financial service, there are a variety of people and firms providing those services. The key difference is their credentials.

Anyone can provide tax preparation services and call themselves a tax preparer, or provide accounting services and call themselves an accountant. But if someone is a CPA or an Enrolled Agent, those credentials tell you which skills that person is licensed to provide.

On the flip side, the skills a person is licensed to provide may not be an exact match to their services. For example, a CPA might specialize in financial reporting as their only service, or an Enrolled Agent might add bookkeeping to their tax preparation services.

Finding the right financial expert for your situation makes a real difference. Knowing your options is the first step to finding the right fit.

Looking for bookkeeping and accounting help? I’m a CPA who specializes in keeping financial records organized for small businesses. Schedule a free consultation and let’s talk about how I can help yours.