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By John Dutson, CPA
A regular accountant can perform many of the same functions as a CPA (Certified Public Accountant), including tax preparation and bookkeeping. So how do you know if hiring a CPA is the right fit for your business?
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What is the difference between an accountant and a CPA?
An accountant is someone who has earned their bachelor’s degree in accounting or finance.
A CPA has a bachelor’s degree, but has earned additional designations upon graduation.
To become certified, an accountant must have work experience, pass the Uniform CPA Exam, and meet all state licensing requirements. The exam covers their knowledge of business, accounting, taxes, and auditing.
Additionally, CPAs are required to take continuing education courses throughout their careers to stay up to date on laws and regulations.
Because of this certification, a CPA has a fiduciary responsibility to their clients, while an accountant does not. This means CPAs are legally required to act in the best interests of their clients, whereas a standard accountant does not have a license to lose.
Not just tax returns
Almost anybody can call themselves a tax preparer. It does not require extensive education to obtain a Preparer Tax Identification Number (PTIN), which the IRS requires for someone to receive compensation for completing a tax return.
But due to the demanding education and testing requirements that a CPA must fulfill, their expertise goes beyond just preparing and filing an accurate tax return on your behalf.
CPAs work with clients all year long, not just during tax season. Your CPA can typically help you with a wide range of issues, including future tax planning, college or retirement savings plans, or business strategies — whatever your goals entail, a CPA can help you achieve them.
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You’re not accountable.
Clients usually seek a CPA to ensure that they are dealing with true professionals who can be held accountable for their actions if ever the CPA code of ethics is not respected or for any other dispute between the client and the CPA.
CPAs have rules of professional conduct and a code of ethics. If they deviate or fail to respect that code, they would face sanctions by the professional body of CPAs. That could include monetary penalties or permanent expulsion from the order of CPAs in severe cases. The accountability rests on your CPA, not on you.
So when should I hire a CPA?
1. When You Are Starting a Business:
A CPA can recommend the best business structure for your company. How you structure your business will have an effect on your taxes – – whether that’s a partnership, an LLC, a sole proprietorship, or a corporation. A CPA will work with you to optimize your business’ goals and recommend legal structures.
2. During Tax Season:
CPAs can prepare tax documents, file tax returns, and strategize ways to minimize your tax liability for the following year. Also, CPAs can represent you if the IRS has questions about your return or if you or your business is audited.
3. In Special Circumstances:
If you’re thinking about taking out a loan for your business, a CPA can help you can recommend the best type of loan for your business, figure out the size of the loan and how payments will affect your cash flow, and prepare financial statements for your loan applications.
Or, when you’re facing significant structural or operational changes to your organization – – such as purchasing a business, merging with another company, planning to sell or close your business, or deciding whether to take on a new partner or dissolve a partnership – – you should consult a CPA about the tax implications for your business and for yourself.
MEET JOHN DUTSON
John is a CPA and the owner of Tax Guardian CPA, a tax preparation firm in Santa Barbara that focuses on detailed, personalized tax prep and consultations for small businesses and real estate investors.
Phone: (805) 364-4460
Email: [email protected]
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