Are You More Likely to Save Money with a Tax Preparer or CPA?

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There are many baffling laws, regulations, and deadlines in the US tax code. While not everyone is required to submit a tax return, the majority of those who generate an income must do so each year. You might have no trouble filing your taxes on your own if your financial state is simple. But a lot of people need the help of a qualified tax expert, such as a Certified Public Accountant (CPA) or a certified tax preparer.

Both tax preparers and Certified Public Accountants (CPAs) can assist you in filing your business tax return, but understanding their benefits and drawbacks will help you decide which level of support is best for your company. When choosing between a CPA and a tax preparer, think about if your main concerns are timely and cost-effective tax filing or whether you also need additional accounting advice to support your tax strategy.

We describe the main distinctions between accountants and tax preparers below so you can choose the one that is most appropriate for your business.

CPA vs. tax preparer certifications

The main distinction between accountants and tax preparers is the level of education and licensing requirements for each profession. Their amount and depth of training influence the services and benefits they provide to customers.

What Is a CPA?

Accounting professionals who have accomplished the necessary educational and professional qualifications and have passed the four-part Uniform CPA Exam are known as Certified Public Accountants, or CPAs. The American Institute of Certified Public Accountants, or AICPA, officially grants the designation of "CPA." Since states provide the certificate, there are different educational and professional criteria. However, the following is typically needed for all CPAs:

  • Complete 150 hours of higher education focused on accounting and business

  • Acquire expertise in accounting (duration varies by state and jurisdiction, usually one to two years).

  • Complete continuing professional education (CPE) obligations to keep your qualifications (the duration differs by state and jurisdiction, usually 40 hours per year).

CPAs typically operate in a wide range of settings since they are required to demonstrate extensive financial expertise in order to get the qualification. Auditing financial records, governmental accounting, financial planning and analysis, litigation support, and tax preparation are among the CPA specializations. Any type of tax-paying individual or company may be represented by a CPA before the Internal Revenue Service (IRS) on any tax-related issue.

If your finances are complex year-round, a CPA might be necessary. A CPA should handle the books for someone who, for instance, must manage large amounts of money or who has their own firm. A person who works constantly in multiple jurisdictions experiences the same thing. A CPA is frequently the best option to keep track of difficult issues that your finances present on a regular basis.

Planning ahead for taxes, whether it's establishing a trust or optimizing deductions, is frequently advantageous for someone with complicated circumstances. A CPA can assist you with that.

What Is a Licensed Tax Preparer?

There are other professionals than CPAs who can submit your taxes on your behalf. Many individuals and private companies decide to pay qualified tax preparers to converse on their behalf before the IRS. Licensed tax professionals must pass the Special Enrollment Examination (SEE), which consists of three parts, and accrue 72 CPE hours every three years in order to represent a taxpayer. The status of enrolled agent (EA) is granted to tax preparers when they have satisfied all requirements. The highest designation awarded by the IRS is EA status.

EAs have the same unrestricted taxpayer representation rights as CPAs. EAs are specialists in tax issues only, unlike CPAs, hence they are quite knowledgeable in this area. However, EAs often don't have the same depth of financial expertise as CPAs. Some tax customers might want a more flexible strategy for filing taxes over a more specific one and vice versa.

If you have questions, especially regarding preparing or submitting your taxes, a tax preparer is typically the best option for you. This can be the person for you if you want to get the most out of any prospective deductions or just feel more at ease when it comes to doing your taxes. A tax preparer may be the best option if you have intricate finances that you generally understand. They will make sure you adhere to the guidelines and don't overlook anything.

Conclusion

The subtleties of your circumstances will ultimately determine what type of tax preparer would best meet your needs. The CPA is considered the gold standard among accounting certifications, and many taxpayers appreciate the feeling of security it offers. CPAs could also be a better option for people and companies looking for a wider range of accounting services in addition to tax preparation. Many CPAs offer financial advice and planning services as well as financial statement issuance for their tax clientele.