If you run a small business, you have a lot on your plate. You are trying to juggle all the day-to-day demands of running your business, and you could probably use a little help. Let us help. Consider these top reasons why your small business should hire a CPA instead of an accountant.
What’s the Difference?
Many small business owners don’t know the difference between a CPA and accountant, so we’ll clarify that for you. An accountant is a broad term that is used to describe a financial professional who complies with a standard set of accounting principles. CPAs are accountants, too, but they have also passed a state licensing examination. Basically, a CPA is an account who has additional credentials. There are lots of small businesses that use accountants, and many of them are quite competent. However, in certain situations, it may be beneficial to take advantage of the services of a CPA.
A CPA has been licensed by the state through a rigorous examination process. An accountant has not. As part of their licensing, CPAs are required to stay current with the tax code. There are continuing education requirements that must be met in order to maintain licensure. These requirements do not apply to accountants. This means that you can trust that a CPA is up to date on financial regulations and tax codes, but you have no guarantee that an accountant has received any continuing education.
Not every CPA specializes in small business taxes. However, generally speaking, CPAs are more well-versed in tax laws than accountants. Much of the licensing exam and yearly continuing education courses taken by CPAs is devoted to the tax code, so they are quite familiar with the current rules. In addition, an accountant is considered an unenrolled tax preparer by the IRS. This means that the accountant can prepare and sign your tax returns, but cannot represent you before the IRS.
There are several types of professionals who can handle your daily financial duties. A bookkeeper can take care of recording business income and expenses. An accountant reviews this information and prepares financial reports, like balance sheets and profit and loss statements. CPAs provide a more comprehensive financial analysis and offer advice on financial and tax matters.
As was previously mentioned, a CPA can represent your business before the IRS, while an accountant cannot. This alone is an important reason to use a CPA rather than an accountant. An accountant, as an unenrolled tax preparer, is only permitted by the IRS to represent clients in a very limited manner. If your business were to be audited, you need to be able to rely on your tax preparer to represent you before the IRS. When you choose a CPA, that person has full authority to represent you to the IRS.
Many small business owners are reluctant to hire a CPA because it costs more than a bookkeeper or an accountant. You don’t have to choose between them; you can do both. Use a bookkeeper to handle the day to day financial duties, like inputting income and expenses. Use an accountant to prepare regular financial reports. Use a CPA to prepare your yearly taxes. Many firms offer all three of these services so that you can get the help that you need on the most cost-effective basis.
If you own a small business and need the support of a financial professional, contact Acceler8. We are your small business advisors, and we can provide the tax and financial support that you need.