Have you ever thought why choose a CPA over an accountant or tax preparer? A Certified Public Accountant (CPA) and an accountant are often used interchangeably, but there are some important distinctions between the two. As well a CPA and tax preparer are two different roles within the field of accounting and taxation and have different roles, qualifications, and responsibilities. Here are some key differences between a CPA, accountant, and tax preparer:
Qualifications and Certifications:
CPA: Becoming a CPA requires a minimum of a bachelor’s degree with additional hours into a master’s degree, passing the CPA exam, and meeting specific experience and education requirements as mandated by the state boards of accountancy. CPAs are licensed professionals with a broad understanding of accounting principles, auditing, financial reporting and taxation. CPAs are required to meet continuing education hours each year to maintain their license.
Accountant: An accountant is a more general term that encompasses a wide range of professionals who work in the field of accounting. Not all accountants are CPAs; some may have different certifications, degrees or qualifications, while others may not hold any specific certification.
Tax Preparer: Tax preparers do not have the same rigorous education and certification requirements as CPAs. Many tax preparers complete short-term courses or training programs to be registered tax return preparers (RTRP), enrolled agents (EAs), or they may simply operate as unregulated tax preparers. EAs, for example, must pass a comprehensive IRS Exam, while RTRPs have to pass a competency test.
Scope of Services:
CPA: CPAs provide a wide range of financial and accounting services, including tax planning, audit and assurance services, financial consulting, and more. They are often involved in complex tax matters, such as advising businesses on tax strategy, performing audits, and helping clients with financial planning. CPAs can also represent clients before the IRS and State Taxing Departments.
Accountant: Accountants can perform various account functions, including bookkeeping, financial analysis, budgeting, and tax preparation. Some accountants may specialize in specific areas, such as management accounting, cost accounting or internal auditing.
Tax Preparer: Tax preparers, on the other hand, primarily focus on the preparation of tax returns. They assist individuals and businesses in completing and filing their tax forms accurately and in compliance with tax laws. While some tax preparers may offer basic tax advice, their expertise is typically more limited compared CPAs.
CPA: CPAs have a deeper and broader understanding of accounting principles and tax regulations. They can provide comprehensive financial advice, tax planning, and assistance with complex tax matters. CPAs are often considered trusted advisors for businesses and individuals seeking financial guidance.
Accountant: Accountants often specialize in tax accounting and have a deep understanding of tax laws and regulations. They help individuals and businesses comply with tax laws while minimizing tax liabilities.
Tax Preparer: Tax preparers have expertise in completing tax forms and ensuring compliance with tax laws. They are valuable for individuals and businesses with straightforward tax situations, but they may not have the expertise to address complete financial or accounting issues.
Regulatory Oversight and Educational Requirements:
CPA: CPAs are subject to regulations by state board of accountancy, which ensures that they meet rigorous educational and ethical standards. They must also fulfill continuing education requirements to maintain their license. Becoming a CPA typically requires a master’s degree in accounting or related field, along with successful completion of the CPA exam.
Accountant: The regulation of accountants can vary widely depending on their qualifications and the jurisdiction in which they work. Some accountants may not be subject to specific regulatory requirements. Accountants may have a varying level of education, ranging from associate degrees to master’s degrees. Some accountants may have certifications like Certified Management Accountant (CMA) or Certified Internal Auditor (CIA) in addition to or instead of a CPA designation.
Tax Preparer: Tax preparers are required to obtain a Preparer Tax Identification Number (PTIN) from the IRS. Some tax preparers are Enrolled Agents (EAs), who are federally authorized to represent taxpayers before the IRS. To become an EA, individuals must pass a comprehensive three-part IRS exam on federal tax topics or have qualifying experience with the IRS. EAs and other tax preparers are not required to hold a college degree or any higher education.
In summary, the main difference between a CPA, accountant and tax preparer lies in their qualifications, scope of services, expertise, and education. CPAs are highly trained professionals with a broader skill set, while tax preparers specialize in assisting with tax return preparation and may have more limited expertise in other areas of accounting and finance. The choice between all depends on your specific financial needs and the complexity of your financial situation.