What’s the difference between a CPA vs tax preparer?
CPAs and tax preparers can both help you with small business tax services, but which one is right for you depends on your particular requirements.
CPA
A certified public accountant (CPA) is licensed by the American Institution of Certified Public Accountants (AICPA). To become licensed, an accountant must pass the four-part Uniform CPA examination. Each part of the exam focuses on a specific part of the accounting world, including Auditing and Attestation (AUD), Business Environment and Concepts (BEC), Financial Accounting and Reporting (FAR), and Regulation (REG). Each state also has individual requirements; a CPA will become licensed nationally and in the state where they practice.
Before they can even take the exam to become a CPA, an accountant needs to complete at least 150 credit hours and earn a bachelor’s degree in accounting or business. Once they pass the exam, accounting professionals must continue their education to stay updated on tax law, tax code, and other vital areas. They likely have more knowledge and experience than general tax preparers and often offer services beyond helping file tax returns.
Licensed CPAs can represent clients in front of the IRS. Tax attorneys and enrolled agents also have this ability.
Tax preparer
While a CPA tax preparer does exist, a general tax preparer is more of a catch-all term that usually doesn’t require a bachelor’s degree. There are three common types of tax preparers:
- An enrolled agent (EA) is either a former IRS employee or has passed the IRS’s Special Enrollment Examination, the highest certification level of the IRS. The exam covers topics like tax preparation for businesses and tax procedures. An enrolled agent must complete 72 hours of continuing education every three years and obtain a preparer tax identification number (PTIN). Like CPAs, enrolled agents can speak with the IRS on your behalf during tax audits, collections, or appeals.
- Preparer tax identification number holders have earned their PTIN and provide tax preparation services. They’re not credentialed and cannot represent clients before the IRS.
- Annual Filing Season Program participants have finished the IRS’s Annual Filing Season Program, though depending on their state, they may not need to pass an exam. Like PTIN holders, they cannot represent clients.
Tax preparers typically cost less to work with than a CPA, since they largely only offer tax preparation services. Some work on hourly rates, though many will charge a flat fee.
Hiring a tax preparer vs CPA
Both a CPA and a tax preparer can help your small business with taxes. Which one you choose will vary based on your current business needs. A tax preparer will likely cost less than a CPA but usually has less extensive knowledge and fewer credentials.
A CPA tax professional may also specialize in certain areas. For example, a tax accountant will be more helpful with tax planning and strategies to help find deductions and lower tax liability. A compliance accountant knows state and federal tax laws, and they work with businesses to keep them compliant and avoid an audit.
Here’s a breakdown of when you might hire a tax preparer and when hiring a CPA makes more sense.
Pro tip: Both accountant fees and tax preparation fees are fully tax deductible when the expense is directly related to your business.
Frequently asked questions (FAQ)
What work do tax accounting professionals perform beyond preparing tax returns?
Tax preparers gather business information and review previous returns to help you file for this year. A tax professional also offers general counsel and will keep updated on tax laws, regulations, and other information that can lower your business tax liability and maximize your deductions. That all helps reduce your overall tax bill or increase your refund.
Can a CPA do my taxes and file them?
As long as a CPA or tax preparer has their preparer tax identification number (PTIN), they can help prepare and file your taxes. However, as the IRS notes, tax professionals have different levels of skills, education, and expertise, so always double-check your tax returns before filing them.
Is a CPA better than an accountant?
Since “better” is a subjective term, choosing a tax accountant vs CPA depends on your business tax and financial planning needs. A CPA is more credentialed than a private accountant and has met certain education and experience requirements for their state. However, a private accountant may be more budget-friendly and could still have significant experience, especially with simpler tax preparation.
Is a Certified Public Accountant worth it for taxes?
Again, the answer depends on how much business tax return preparation you need. Many CPAs will offer tax filing as part of their services, but if you have a more straightforward tax return, you may find a tax preparer to be a better fit.
How Bench can help with CPA and tax prep needs
Choosing between CPAs and tax preparers ultimately comes down to your business needs. If you’re having trouble deciding, Bench offers the best of both: we have on-demand CPAs and tax advisors, as well as tax prep support and filing services.
Get rid of the stress of last-minute filing by starting tax preparation early. We take tax prep off your plate by having all your financials organized through clean, monthly books.
Our team of bookkeepers prepared a Year-End Financial Package with everything you need to file, including your income statement, balance sheet, trial balance, journal entry summary, and general ledger.
That tidy package with everything in one place makes it quite easy to share with a CPA or tax preparer. We can even file your taxes for you, both business taxes and your individual tax return.
Ready to simplify your small business tax filing? Get started here.
