CPA Tax Accountant – What You Actually Need Them For | Sales Funnel HQ
In many cases, using a CPA tax accountant can be a valuable investment that can help reduce your tax bill and protect you. We often assume that the more we do something the easier it will get. This is true with some things but usually not with taxes. As people and businesses develop financially it seems things become more complicated and complex. Finding a trusted and knowledgeable CPA tax accountant could be your golden ticket to simplifying taxes and maximizing revenues and income.
As you may know there are many types of tax experts including some that are more cost effective than CPA tax accountants. Compared to other types of tax experts, CPA tax accountants offer distinct advantages and are held to some of the highest standards and requirements. In addition, they are required to act as a fiduciary to their clients. If you are reading this you are probably wondering if you need a CPA tax accountant, what they do, how they benefit you, or what comparable options might be available. Keep reading to discover answers to your questions about CPA tax accountants and tax experts.
What Is A CPA Tax Accountant?
A CPA (Certified Public Accountant) is a qualified business advisor, decision-maker, and consultant with a fiduciary responsibility. Most CPAs specialize in certain areas. A CPA tax accountant is usually someone that specializes in tax preparation. It’s important to locate a reputable CPA that’s well qualified and specializes in the areas you need help with.
CPA tax accountants offer distinct benefits such as:
- Providing audit support
- Authority to represent you with the IRS
- Preparing audited or reviewed financial statements
A CPA tax accountant is required to meet rigorous education standards, pass the CPA exam, and fulfill specific state licensing and continuing education requirements.
What Does A CPA Tax Accountant Do?
CPA tax accountants are responsible for maintaining the highest standard of knowledge and ethics. They operate in financial positions and are in charge of proprietary information.
For businesses and individuals, CPA tax accountants serve as:
- Business advisors
- Decision makers
- Tax consultants
- Accounting consultants
- + more
Who Needs A CPA Tax Accountant?
CPA tax accountants can be useful for a wide variety of situations. As mentioned above, there are many types of tax experts, some that are more affordable than a CPA tax accountant.
A CPA tax accountant is recommended when you:
- Buy your first house
- Become a landlord
- Buy a vacation property
- Work from home
- Own your own business
- Make home improvements
- Have your home value reassessed
- Experience financial change
- Need audited or reviewed financial statements
- In Search of audit support
- Need representation with the IRS
Why Should You Hire A CPA Tax Accountant?
A CPA tax accountant can save you time, stress, and hassle while adding value to your financial future. They can also help you proactively prevent possible financial complications or problems with the IRS. If your taxes are simple and you are just filing your W-2, you can most likely handle it yourself. If your taxes are more complex, then using a CPA tax accountant can be a valuable resource. Below are some situations that a CPA tax accountant can be beneficial to.
Who Should Hire A CPA Tax Accountant?
#1. Small businesses, side-hustles, or freelancers should use a CPA tax accountant.
If you fall into one of these categories or similar categories a CPA can help you take advantage of potential tax write-offs. In today’s ever-changing workplace, there is an increasing amount of people filing out 1099s. Many people are gathering income from activities such as driving for Lyft or Uber, selling products online, delivering Amazon packages, and more. It seems many of us are earning income from various sources or own our own business. This may cause more people to be in search of a reputable CPA tax accountant. Hiring a CPA for taxes can help you navigate the potential tax benefits available to you.
#2. Planning for your kids to go to college? You should hire a CPA tax accountant.
Consulting a CPA tax accountant prior to completing a Free Application for Federal Student Aid (FASFA) can be beneficial to the outcome of the applicant. There are certain circumstances that can be positive for tax planning purposes, but negative for getting approved for financial aid. An example of this could be having unwanted assets in your kid’s name. Other circumstances can include having a child that is part owner of your business or has a 529 plan or Coverdell ESA. If your assets and income are fairly straightforward, you might be able to seek a less expensive tax expert to assist you with planning for your kids to go to college.
#3. The IRS is knocking at your door… hire a CPA tax accountant.
Any activity that involves the IRS, even something as basic as a substantiation of expenses related to a purchase, deserves the assistance of a CPA tax accountant. It’s critical to provide correct information and verbiage when dealing with the IRS. One simple mistake could lead to more serious problems or investigations by the IRS. If you do end up being audited by the IRS, a CPA tax accountant can represent you.
#4. Retirement planning may be self-directed but at some point, you should consult a CPA tax accountant.
Ensuring your retirement plan is on track to produce maximum benefits is an important part of your financial plan. There are many vehicles you can use to self-direct your retirement plan such as Roth IRAs, 401(k), and investments such as real estate. When it comes to filing returns on these investments it can get complicated. Since these are an important part of your financial portfolio it’s important to make sure they are handled properly. Hiring a trusted CPA tax accountant to review your financial retirement plan and assist with returns can be beneficial to your retirement.
#5. Rental property owners should hire a CPA tax accountant.
If you own a rental property you might be entitled to certain kinds of tax deductions. A CPA tax accountant can help you take advantage of deductions when it comes to filing returns. If you’re filing your first return as a rental property owner it’s highly recommended to seek the help of a CPA tax accountant. They can offer education as well as assurance that your return is done properly. Thus, maximizing your benefits.
CPA tax accountants can help with a wide variety of situations. Whether or not you need a CPA depends on the complexity of your situation.
Additional situations that a CPA tax accountant or accountant can help with include:
- Helping you improve your credit score
- Debt reduction
- Annual income of $200,000+
- Multiple sources of income
- New business ventures
- Large financial gifts or donations
- Back taxes owed
- Increase savings
What Qualifications Should A CPA Tax Accountant Have?
Typically, a CPA tax accountant is a qualified professional that studied accounting and earned a bachelor’s or master’s degree in business or accounting. In addition, a CPA tax accountant must pass the state board CPA exam and other required testing on a regular basis. They must also meet work experience requirements and continue their professional education. If you are looking for a CPA tax accountant, you should make sure they specialize in taxes. Some CPA’s do not specialize in taxes. You can find tips for finding a qualified CPA tax accountant a little later in this blog.
What Are Some Advantages of Using a CPA Tax Accountant?
The three main types of financial statements prepared by CPAs, including: audited, reviewed, and compiled. If you need audited or reviewed financial statements you need to use a CPA tax accountant. They can prepare these financial statements for you whereas a non-CPA cannot. If you have a small business, you might not be required to produce audited or reviewed financial statements. However, in the event you are requested to produce them you can be one step ahead if you are already using a CPA tax accountant. Public companies, on the other hand, must produce audited statements.
How Can You Find A Well-Qualified and Reputable CPA Tax Accountant?
You get what you pay for in most cases. Finding a CPA tax accountant is fairly simple. But are they good? It’s important to qualify any CPA tax accountant before hiring them, even expensive ones or ones referred to you by a trusted friend. Find your top 4 or 5 CPA tax accountant candidates and then do your due diligence. Some ways you can perform due diligence include: conducting a basic internet search, read reviews, and check their license number. In addition, ask qualifying questions, such as:
- How long have you been in business?
- When do you plan on retiring?
- What clientele do you focus on? Why?
- What differentiates you in your professional arena?
- What are your fees?
- How many of last year’s returns were audited?
- Have you ever had any complaints?
- Have you ever had any problems or accusations with any professional boards?
- How many clients do you currently have?
- How many clients left you last year? Why?
It’s normal to ask your potential CPA tax accountant for a few client and professional referrals. Ask them the questions you want and don’t be shy. It’s an important entry to establish a trusted relationship and select a CPA tax accountant you are comfortable working with.
Creativity is a beneficial skill for a CPA tax accountant to have. You can test creativity by asking your potential CPA tax accountant to review your last tax return. Most likely there will be a fee for this so make sure to ask upfront what this will cost. The purpose of the review is to find out what your potential CPA tax accountant would have done differently, what errors they notice, and to identify missed opportunities and audit red flags. You can also ask them their opinion on your retirement plan and how to maximize your options.
What Services Can A CPA Tax Accountant Offer?
#1. Tax Filing and Planning
You should consult a CPA tax accountant to ensure your financial reporting complies with current IRS regulations. In addition, they can help determine the tax liability of your company and ensure filing requirements and deadlines are met. Perhaps one of the most appealing advantages of using a CPA is having someone on your side that can propose ways to reduce your taxes.
Whether you’re an individual or company, a CPA tax accountant can assist you with investments, taxes, financial planning, mergers and acquisitions, and more. This means if you are looking to buy property or upgrade your infrastructure, your CPA tax accountant can help you plan. In addition, they can help you understand and determine break-even points and cash-flow requirements.
Large and small accounting firms for businesses usually offer accounting and auditing as their core services. Typically some of the main actions of accounting and auditing are producing financial records, tracking revenues and expenses, and providing consult on the overall financial health of your business. An example of audit services could be an examination of annual reports for public companies. Niche areas continue to expand causing an increase in demand for CPAs with unique areas of expertise.
Periodic financial audits are required of many businesses. Typically, audits are requested by investors or written into the bylaws of an incorporation. Audits are performed with the goal of determining whether your financial statements are presented accurately and fairly and comply with generally accepted accounting practices. When the audit is performed the accounting firm usually examines your:
- Financial records
- Processes and controls
Auditing these areas helps to ensure:
- Records are properly kept
- Policies are followed
- Financial practices effectively support your business goals
Developing a financial strategy can provide short- and long-term benefits. CPA tax accountants can provide support and advice in both strategic and financial areas. Financial institutions, businesses, individuals, nonprofit organizations, and government agencies typically need their CPA tax accountant to offer consulting services.
How Do You Select The Right Accounting Firm?
You might find it simpler to select the accounting firm you want to use prior to selecting a specific CPA tax accountant. Online reviews can be easier to access for accounting firms. To narrow down your options you should consider firms that offer specialized services.
Some examples of specialized services include:
- Information System Services. If you gather information into computer database systems, you may need these services. They usually include an examination of computer systems and their integrity, security, and practices being used to process and protect information.
- Fraud or Forensic Accounting Services. These services can help your business if it’s the subject of a legal dispute or perhaps you just simply suspect something in the financial arena is off. The goal is to uncover illegal or fraudulent activity by investigating complex financial documents.
What Are the Different Types of Tax Experts?
If you are looking to recruit some help with accounting or taxes, it’s important to understand the different kinds of tax experts out there and what they do. Once you have determined the type of tax expert you need, you should then select the right individual or firm. Defining what you want to gain from using a tax expert can help you make a better choice. Ensuring you have the right person on your team can be critical to solve problems and get things done properly.
#1 EA (Enrolled Agent)
In many cases, an EA might charge less than a certified public accountant while offering similar knowledge. EAs are registered at the federal level. An EA has the ability to represent clients before any department of the IRS. In order to receive EA certification, EAs must pass a complex IRS-sponsored exam, and pass a background check. To maintain EA certification, one must continue to fulfil education requirements. If the IRS challenges your return, an EA or CPA are the only accountants that can represent you legally.
#2. Tax Preparer
A tax preparer can usually be found at pop-ups such as H&R block. Primarily their role is to help taxpayers file returns using tax software they are experienced with. However, tax preparers are not required to have experience or education. Some states make it mandatory for tax preparers to register and meet specific educational requirements. Overall, if you are dealing with a rather simple return you might be fine using a tax preparer. If you are in a state that allows tax preparers to operate without registration or education you are probably best handling taxes yourself or seeking the help of a CPA tax accountant.
#3. AFSP (Annual Filing Season Program Participants)
AFSPs generally have more intense continued education requirements. Thus, pushing their rank slightly above State Certified Tax Preparers. The IRS’ annual filing season program mandates requirements such as an annual refresher course with a test. AFSPs must complete this requirement in order to register each year. Due to the fact that AFSP participants have limited representation rights they can represent clients with returns prepared by:
- IRS auditors
- Customer service representatives
AFSP participants cannot represent clients with returns prepared by:
- Collection agents
#4. Tax Attorney
Research shows that about 90% of CPAs are not qualified or prepared to handle Tax Representation cases. Tax attorneys are often the ultimate tax experts when dealing with the most complex and twisted situations. However, there are a few reasons why they might not be your go-to person for preparing tax returns. One reason is the cost of their services. Their price tag usually reflects the extremely high level of expertise they offer.
There are some situations where it is worth it to fork out the extra money for a tax attorney such as:
- Headed to tax court? If so, you should seek the help of a tax attorney.
- Being charged with Tax Fraud or Tax Evasion? If yes, you should seek the help of a tax attorney.
- Being audited? You should seek the help of a tax attorney.
- Owe tax debt? Seek the help of a tax attorney.
- Suspect you have committed fraud on a return? If yes, you should seek the help of a tax attorney.
#5. CPA (Certified Public Accountant)
Dealing with a complex tax situation? Trying to reduce your tax bill? If so you should seek the help of a CPA that specializes in tax preparation or planning. Accounting is the main purpose of a CPAs job, but a majority of CPAs specialize in other areas as well. Prior to working with a CPA for a complex tax situation you should perform due diligence on them and confirm they are a reputable tax specialist. Using a CPA can be more expensive than using an EA.
Should You Use A Cost Effective EA or Splurge On A CPA Tax Accountant?
As we mentioned above if you are dealing with a complex tax situation using a CPA tax accountant is most likely your best option. Additionally, if you need assistance in areas such as preparing financial reports for your business you should use a CPA tax accountant. CPAs and EAs both posses unlimited practice rights before the IRS. One of the primary differences between a CPA and EA is their level of registration. A CPA is registered on a state level, while an EA is registered on a federal level.
What Does an Accountant Do?
An accountant can be defined as a qualified professional whose primary job is to inspect or maintain financial accounts. Even if you don’t have a degree in accounting you could fulfill the job description with training and call yourself an accountant. However, most of the time, an accountant will have an accounting or business-related degree. Accountants can perform a wide range of additional services such as bookkeeping, managing simple tax-related matters, and maintaining general business accounts.
Are CPAs the Same as Tax Accountants?
CPAs and tax accountants have similarities but are different in many ways. A CPA is typically more qualified and ranked higher. It’s important to note that all CPAs are accountants, but not all accountants are CPAs.
What Are the Primary Differences Between a CPA and a Tax Accountant?
#1. CPAs are required to pass the CPA exam and abide by strict state licensing requirements.
CPAs are certified at the state level for the state in which they intend to practice. In most cases, to qualify for the CPA exam candidates must complete 150+ hours of college coursework. This includes specific educational coursework and time in upper-level accounting, core business classes, and auditing. Once they have graduated they are required to spend a minimum of one year working under the supervision of a CPA.
After this, they take a comprehensive test and must receive a passing score. This is known as the CPA exam and includes test topics such as business, auditing, and general accounting skills. Continued education is required for CPAs even after they pass the CPA exam, as well as throughout their entire career as a CPA. This helps to ensure CPAs are up-to-date on information, changes, and issues relevant to the accounting world.
#2. CPAs have a fiduciary responsibility.
A fiduciary responsibility means that CPAs have a legal duty and power to act on behalf of, and in the best interest of, their clients. Accountants that don’t have CPA certification should act as if they have fiduciary responsibility but are not considered to be fiduciaries to their clients.
#3. CPAs can offer extensive knowledge and advantages regarding taxes and regulations.
Accountants and CPAs are both capable of preparing a proper tax return.
However a CPA can offer valuable advantages compared to a non-CPA. This can be a result of CPA education and licensing requirements. CPAs usually offer extensive knowledge about tax codes. Being able to provide audit support and represent clients before the IRS is another advantage of using a CPA.
#4. CPA tax accountants are required to meet high professional standards and comply with a strict code of ethics.
In addition to CPAs licensing and education requirements, they must also follow a strict code of ethics.
What Should A CPA Tax Accountant Cost You?
Defining the amount a CPA tax accountant should cost is complex. To explain what I mean, think about asking what the cost of a new 2018 model vehicle is. The make of the car, features, location, and so on can all cause the exact ‘out the door’ price to vary. The same concept applies when asking what a CPA tax accountant should cost. The cost can vary depending on the complexity of the return, services requested, and other factors.
How Can You Justify The Expense Of A CPA Tax Accountant?
The upfront cost of a well-qualified CPA tax account can detour some but usually they are worth the investment. You want someone that is thorough, experienced, and trustworthy. Most of us are on a budget or cautious about where our money goes. Therefore, it is important to hire an experienced CPA tax accountant that can improve your situation.
To make working with a CPA tax accountant more affordable you can:
Establish a long-term relationship
To maximize the benefits of using a CPA tax accountant, you should use them regularly and build a lasting relationship. While anyone can drop numbers using software, a CPA tax accountant can dive deeper into the numbers based on your personal situation. They analyze situations to create savings opportunities now and in the future. Once you have found a CPA tax accountant you are comfortable with and trust, stick with them. This allows them to become familiar with your situation and goals. This is beneficial to you because they can spot discrepancies, changes, or lucrative opportunities. In addition, they can also help you execute preventative actions to create more long-term value.
Organization is key
Typically, the norm is for CPA tax accountants to charge by the hour. Showing up to appointments with deductions, revenues, and other information in an organized and easy-to-read format can save time and money.
Use facts rather than assumptions
Tax laws and regulations can change. It’s important to consult with your CPA tax accountant before making financial decisions. Especially if you assume it will decrease the amount of taxes you owe or improve your situation. Some examples of financial decisions are donations, gifts, and vehicle purchases.
Exchange honesty with your CPA tax accountant
Your CPA tax accountant is required to act as a fiduciary. This means they must act in your best interest and keep your information private. You are paying your CPA tax accountant to help you. In order to help in the right way, they must know your entire situation. You might be embarrassed to share certain financial details with your CPA tax accountant but it’s in your best interest to share it with them. When you withhold information, you enable your CPA from doing their job to the fullest. Be sure to be honest so your CPA tax accountant can devise the best plan to claim expenses or report earnings while representing you.
Do Small Businesses Need a CPA Tax Accountant?
If you own a small business, a CPA tax accountant may be critical to your success. For very small businesses, you might be able to get by with an accountant but can still gain advantages by using a CPA tax accountant. Bonus perk: some CPA tax accountants specialize in small business taxes.
An accountant can prepare and sign your tax returns. However, if you run into any problems with the IRS, you might need representation. Accountants cannot represent you before the IRS while CPAs and CPA tax accountants can.
Can an Accountant Perform a Financial Analysis for a Business?
Yes, an accountant can provide a financial analysis for your business. However, a CPA tax accountant can go beyond just providing a basic financial analysis. Typically accountants or CPA tax accountants use bookkeepers to input records into a financial software program. These records can include business income, expenses, and more. Now here is the part where accountants and CPA tax accountants differ. The accountant usually reviews the data input, prepares, and analyzes financial reports. CPA tax accountants should perform these actions as well, and then some. CPA tax accountants can provide a more detailed and thorough analysis. In addition, they can also provide advice regarding tax and financial matters.
Can an Accountant Represent Your Business Before the IRS in an Audit?
No, an accountant cannot represent you or your business before the IRS in an audit. However a CPA tax accountant can represent you or your business before the IRS in an audit. For many businesses, this is the deciding factor between using an accountant or a CPA tax accountant.
Tips for Businesses Working with a CPA Tax Accountant
A bookkeeper and a CPA tax accountant are two people businesses benefit from every day. You can either find a CPA firm that offers bookkeeping services or hire your own bookkeeper. If you hire your own bookkeeper, they can usually create monthly, quarterly, and yearly financial reports. You can consult and review these reports with your CPA tax accountant periodically and have them do your business taxes. Hiring your own bookkeeper can help separate more routine financial jobs. Thus, allowing your CPA tax accountant to provide more attention to the tax and financial analysis portion of a report.
Can Businesses Use Tax Software to File Returns?
Businesses can use tax software to file returns but it’s not recommended. If you are on a budget, using tax software might be an attractive option. Before selecting this option you should consider the time and potential risk of errors, trouble, and potential setbacks. Although a CPA tax accountant can be costly they can be a smart long-term investment that can actually save you time and money. If you decide to take the risk of doing your own business taxes, at the very minimum, you should consult a tax professional for guidance.
How Can I Maximize the Benefits of Using a CPA Tax Accountant?
Outside of routine returns, financial analysis, and basic activities involving your CPA tax accountant, you should always ask out of the box questions. To help maximize the benefits of using a CPA tax accountant you should discuss topics such as:
- Financial needs and wants
- Taking advantage of all possible tax deductions
- Ask about corporate retirement plans if you’re self-employed
- Converting from an IRA to a Roth IRA
- Gifting assets
- Contributing to investments
- Donating stock
- Ways to lower your tax bill
- Required Minimum Distributions (if you’re retired)
How Often Should You Visit Your Tax Accountant?
If you are dealing with individual returns or finances it’s common to only visit your CPA tax accountant once a year. If you’re a business you should consult with your CPA tax accountant on a pretty regular basis. Communication is the foundation of building a successful relationship with your CPA tax accountant. It can also help you achieve your wants and needs. Being open and honest with your CPA tax accountant can help you achieve success in many ways.