CPA vs Tax Preparer: Key Differences & Who to Hire

A CPA can formulate budgets, offer advice on investment strategy, weigh What is bookkeeping the merits of mergers or acquisitions, or offer attestation services. The tax preparer’s strength lies in efficiently handling routine tax returns for individuals with uncomplicated tax situations. While both professionals help individuals and businesses with taxes, their qualifications, services, earning potential, and authority vary significantly. Below, we break down the key differences between a tax preparer and CPA to help you determine which path suits your needs best.

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• “Tax professional” is a broad, umbrella term that can describe anyone who offers tax services.
• Book a demo today to see what running your business is like with Bench.
• If your returns are getting more complex each year, or if you want ongoing strategic advice, you likely won’t regret the investment in a CPA.
• There are a few different kinds of tax specialists you may be able to employ.

You know you need help, but the alphabet soup of credentials like CPA, EA, and “tax preparer” can be confusing, leaving you unsure of who to trust with your financial future. For small businesses, accountants are usually a better fit because they offer comprehensive services, including bookkeeping and strategic financial advice. Not all tax preparers are certified, but certifications like EA or CPA indicate a higher level of expertise.

CPA vs Tax Preparer: What’s the Difference Between a CPA & Tax Professional?

Simple returns might cost a few hundred dollars, while complex business returns can be significantly more. For a deeper look at potential costs, refer to How Much Does a CPA Cost?. The primary difference in enforcement is that a CPA can lose their state license for violating state accounting rules, while an Enrolled Agent risks losing their federal practice privilege. The state board’s authority over the CPA is broader, covering financial reporting and general business practice, not just tax compliance. This comprehensive oversight ensures the CPA remains subject to rigorous ethical and competency standards.

Hours Of Operations

Their official guide reminds taxpayers that only CPAs, EAs, and attorneys have unlimited representation rights, a key consideration if things get complicated. Tax preparers range from part-time seasonal workers at national chains like H&R Block or Jackson Hewitt, to full-time professionals who assist clients year-round. They may or may not have formal credentials, and the quality of service can vary widely depending on their experience and training. If you need a simple return, a tax preparer is a cost-effective option. If you want tax strategy or business advice, paying more for a CPA can save money in the long run.

The state license grants the CPA exclusive authority over attestation services, including auditing, reviewing, and compiling financial statements. An audit provides the highest level of assurance to third parties that financial statements are presented fairly in accordance with GAAP. To develop skills before applying for positions, tax preparers may research tax laws, register for finance webinars, and enroll in accounting classes through a vocational school.

Refunds

TurboTax takes a final audit of your state and federal return before allowing you to submit the paperwork to the IRS. This Payroll Taxes helps you be able to catch more errors than you might see on your own. CPAs double-check their work as well, but there is a human element to the accountant which is not present in the software, which can lead to a more accurate self-prepared return. Of course, any software solution is only as good as the data it receives. When you input your own financial figures into TurboTax, however, there is a maximum tax refund guarantee. The software will review all potential credits and deductions to determine if you may qualify for ones you haven’t filled out.

The different fields of accounting

CPAs undergo a lot of training to get their license and real-world work experience. Before applying for their license, CPAs typically need from six months to two years of accounting experience, depending on the state. To gain experience, many CPAs take up entry-level roles in the accounting division of a business or for an accounting firm. A bachelor’s degree in business, accounting, or a similar subject is the minimum educational requirement to become a CPA. Although it usually takes 120 hours to acquire a bachelor’s degree, some states demand 150 hours of coursework before students can sign up to take the CPA exam. A Certified Public Accountant, or CPA, is a licensed accounting professional with advanced qualifications.

• We’ll define each role, highlight the critical differences, and suggest the scenarios in which one might be more suitable.
• While EAs specialize in tax law, they focus primarily on tax preparation and representation, making them a great option for individuals who need assistance with IRS-related issues or tax controversies.
• Moreover, tax preparers are usually preferred by individuals who do not require any other accounting services.
• They are highly trained in accounting principles, financial planning, and tax law, making them ideal for clients with complex financial situations or those seeking broader financial advice.
• The agent had no idea I hadn’t been personally waiting on hold.
• This continuity means someone knows your financial history and can offer timely, strategic advice as your goals shift.

When to Hire a CPA vs. Tax Preparer

With TurboTax, you are able to complete the return on your own and verify that the information is complete. Starting in 2017, you could even pay to ask CPAs a question about your return if you were uncertain about something. While the IRS encourages non-credentialed tax preparers to increase their knowledge through continuing education, doing so is optional. These services are essential for larger businesses or startups looking to scale, and tax preparers simply don’t provide them.

Yes, accountants can prepare taxes and often provide additional tax planning services to minimize liabilities. The preparation required of CPAs reflects their broader range of expertise. Just like an Enrolled Agent, a CPA is qualified to provide tax services and to represent clients before the IRS. CPAs must understand local and federal tax laws, and can advise their clients on tax strategy.