Tax season will be here before you know it. Do you know who is handling your finances?
It’s time to start making some decisions, especially in regard to who will be doing your taxes. It’s tempting to want to save money by doing them yourself but hiring a tax expert can be crucial in finding not-so-obvious opportunities, breaks, or deductibles that could minimize your taxable income. More often than not, the time and money you could save with a professional would make the investment worth it.
There are a few things to consider when choosing a professional to handle your finances. A lot of people don’t fully understand the difference between a CPA and a tax preparer, or you may just still have doubts that hiring someone is better than doing it yourself. We want to help you make the best choice when it comes to your money, so here is everything you need to know about shopping for a CPA, tax preparer or accountant before tax season.
Types of Tax Professionals
There are different levels of tax professionals for a reason — and you’re about to know why. They include certified public accountants (CPA), enrolled agents (EA), tax attorneys, and non-credentialed tax preparers.
CPAs, EAs, and tax attorneys all have unlimited rights to represent a client to the IRS, while non-credentialed tax preparers do not possess any professional credentials or certifications from a third-party organization (such as the IRS, AICPA, or a Bar Association). The main difference between each comes down to their levels of tax and finance-related education.
And of course, the “fifth” type of tax preparer is yourself. It is possible for you to do your own taxes if you choose to do so.
Let’s compare some of these roles directly to a CPA to find the right match for your needs.
CPA vs. Tax Preparer
Let’s assume you have no interest in attempting to tackle your taxes on your own. So you’re considering either a CPA or a tax preparer. We’ll compare the notable differences between the two that may impact your level of trust and comfort when it comes to your taxes.
The main difference is that tax preparers aren’t required to receive a specific degree. While they do have to take an exam, it is significantly less strenuous than the CPA exam with fewer questions and time commitment. CPAs must obtain at least a Bachelor’s degree in Accounting and CPAs also must take a state-regulated certification exam that requires additional coursework beyond the initial degree.
Tax preparers also have the opportunity to learn their trade while on the job versus in the classroom. While they are trained in financial tasks, many of these may not be tax-specific.
Most importantly, CPAs are qualified to represent you to the IRS, while tax preparers can only give you what you need to represent yourself. Having an expert in handling government regulations and communications for you can offer much more peace of mind.
CPA vs. Accountant
Many people don’t realize that there actually is a difference between a CPA and an accountant. In fact, all CPAs are accountants, but not all accountants are CPAs. Here are the key differences:
- CPAs require more education. Accountants also have to have a Bachelor’s in accounting, but they are not required to pass a state-regulated exam to earn the extra title.
- CPAs have to prove higher experience levels. The CPA exam measures an individual’s knowledge and experience level in 4 categories: auditing, financial accounting and reporting, regulation, and business environment.
- CPAs focus on taxes. While all accountants have to be skilled in finances, the primary focus of a CPA is taxes. And that makes a difference in more complicated issues.
CPA vs. DIY
If you are considering doing your taxes yourself, let’s discuss the pros and cons. Depending on what kind of return you’re looking for, hiring a CPA may not be a small investment. Individuals with simple returns and income below $69,000 may look to rely on free online tax planners and YouTube videos to avoid those fees.
While everyone is capable of preparing their own tax return, this doesn’t necessarily mean that you should. If your taxes are more complex, they can be extremely time consuming. Hiring a CPA who has dedicated their entire education to understanding tax laws can help you avoid any errors in reporting.
Some factors that can impact the complexity of your taxes are the following:
- Foriegn income, bank accounts, or investments
- A major life event
- Owning a rental property
- Being Audited
CPAs not only complete your tax return for you, but they also help you plan throughout the year to help you save money. They’re experts in the ever-changing laws and know how to dissect your specific situation — something you won’t achieve in a 40-hour, at-home course. CPAs are reliable, consistent, and will save you both time and money on your returns.
How To Choose the Right CPA for You
If you’ve decided that a CPA is the right fit for you this tax season, you should put some thought into who you’re hiring. You need to consider your specific needs and how their experience matches those needs. Whether it’s a CPA with extensive experience in multi-generational estates or working with business owners, a lot of professionals tend to have niche focus areas that may make them a better fit for you.
And CPAs typically aren’t a one-time hire — you want someone who is with you as your tax situation evolves. It should be someone you enjoy working with and who you can trust with your most valuable assets. That’s why a great way to find a CPA is through referrals from others. Using the same services as someone you have a personal relationship with will ultimately set you up for success. If they trust their CPA enough to refer you to them, that means you’ll receive outstanding tax services exclusive to your needs at all times.
At Brilliant Accounting, we are experts on corporate, estate and trust, and individual taxes. We can help you prepare for tax season, as well as get you ready for audits, payment plans, and liens and levies. We’re here for you, so if you’re looking for a trusted CPA to use this tax season, contact us today.