{"id":29949,"date":"2025-01-16T00:57:04","date_gmt":"2025-01-16T00:57:04","guid":{"rendered":"https:\/\/peraltafinancing.com\/accounting\/cpa-versus-tax-preparer-whats-the-difference\/"},"modified":"2025-01-16T00:57:04","modified_gmt":"2025-01-16T00:57:04","slug":"cpa-versus-tax-preparer-whats-the-difference","status":"publish","type":"post","link":"https:\/\/fivemor.com\/?p=29949","title":{"rendered":"CPA Versus Tax Preparer: What\u2019s the Difference?"},"content":{"rendered":"


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Anyone who registers for an IRS<\/span> Preparer Tax Identification Number<\/span> (usually abbreviated as PTIN) is authorized to prepare taxes for compensation. The requirements are minimal: In order to obtain a PTIN, the applicant must verify with the IRS<\/span> that they are in compliance with their own taxes and pay a small yearly fee ($19.74 in 2024).<\/p>\n

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While the IRS<\/span> encourages non-credentialed tax preparers<\/span> to increase their knowledge through continuing education, doing so is optional.<\/p>\n

A PTIN authorizes the holder to do one specific thing: prepare taxes for compensation. Without additional credentials, the PTIN-holder has no authority to represent clients before the IRS<\/span>. If a tax-preparer<\/span> has no additional credentials, should the taxes they\u2019ve prepared require additional scrutiny from the IRS<\/span>, the taxpayer<\/span> will have to represent themself or (most likely) seek more qualified professional help.<\/p>\n

What Are Representation Rights, and When Do You Need Them?<\/h2>\n

Both Enrolled Agents<\/span> and Certified Public Accountants<\/span> (CPAs<\/span>) have unlimited representation rights. This means that in addition to preparing taxes, they are allowed to represent clients before the IRS<\/span> on any matters, including audits, payment and collection issues, and appeals. So if a client\u2019s taxes have been audited, the Enrolled Agent<\/span> or the CPA<\/span> can communicate with the IRS<\/span> on the client\u2019s behalf.<\/p>\n

The know-how<\/span> of a qualified professional can prevent problems from arising, resolve problems that do arise without generating additional errors, and smooth a stressful experience through effective communication both with the IRS<\/span> and their client.<\/p>\n

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Enrolled Agents Are Tax Specialists<\/h2>\n

An Enrolled Agent<\/span> is a tax professional<\/span> licensed by the IRS<\/span>. They can assist on a wide variety of tax-related concerns, starting with tax preparation<\/span> but extending to advanced planning to develop an overall tax strategy<\/span>, optimizing credits and deductions, maximizing tax refunds<\/span>, and ensuring that their clients remain in compliance with local<\/span> and federal <\/span>tax<\/span> codes<\/span>.<\/p>\n

Enrolled Agents<\/span> (EAs<\/span>) must pass a comprehensive three-part exam administered by the IRS<\/span>, covering federal <\/span>tax<\/span> planning<\/span>, individual and business <\/span>tax<\/span> return<\/span> preparation<\/span>, and representation. They must also complete 72 hours of continuing professional education (CPE<\/a>) every three years.<\/p>\n

CPAs Are Accounting Professionals<\/h2>\n

Just like an Enrolled Agent<\/span>, a CPA<\/span> is qualified to provide tax services<\/span> and to represent clients before the IRS<\/span>. CPAs<\/span> must understand local<\/span> and federal <\/span>tax<\/span> laws<\/span>, and can advise their clients on tax strategy<\/span>.<\/p>\n

However, a CPA<\/span> has a a year-round<\/span> job that doesn\u2019t end with the tax season<\/span>. CPAs<\/span> are accounting professionals<\/span> trained to provide services as straightforward as bookkeeping<\/span> and as complex as business analysis. A CPA<\/span> can formulate budgets, offer advice on investment strategy, weigh the merits of mergers or acquisitions, or offer attestation services.<\/p>\n

With so many options, CPAs<\/span> often specialize. Their work experience<\/span> might suit them to a specific kind of client\u2014on individuals, small businesses<\/span>, large corporations, or even non-profits<\/span>\u2014or a specific industry. Alternatively, a CPA<\/span> might advance their competency<\/span> in a specific type of accounting, focusing on tax issues<\/span>, forensic accounting, attestation, advisory services<\/span><\/a>, or a wide range of other possibilities.<\/p>\n

The preparation required of CPAs<\/span> reflects their broader range of expertise. CPAs<\/span> must obtain a bachelor\u2019s<\/span> degree with a focus on accounting, pass the CPA<\/span> exam<\/span>, meet thresholds for experience and character, abide by a standard of ethics and also commit to continuing education every year.<\/p>\n

The Uniform CPA<\/span> Examination<\/a> is a 16-hour, computer-based test that covers subjects including accounting, auditing, regulation, tax compliance and planning, and business analysis.<\/p>\n

A CPA<\/span> is licensed by their state\u2019s Board of Accountancy. Every state has a Board of Accountancy, which issues CPA<\/span> licenses, sets minimum educational requirements, administers exams, and establishes other state-specific requirements<\/a>. Many states have reciprocity agreements that allow a CPA<\/span> with a single state\u2019s license to practice more broadly\u2014a map of CPE reciprocity within the US is available here<\/a>.<\/p>\n

The American Institute of <\/span>Certified Public Accountants<\/span><\/a> (AICPA<\/span>) is the national professional organization for CPAs<\/span>. Just like the IRS<\/span> sets the standards for Enrolled Agents<\/span>, the Security and Exchange Commission (SEC) is ultimately responsible for setting the standards and principles that apply to accountants. Since 1973, the SEC has made the Financial Accounting Standards Board (FASB), a subsidiary of the non-profit<\/span> Financial Accounting Foundation, responsible for developing the the General Accepted Accounting Practices (GAAP) which all CPAs<\/span> are expected to follow.<\/p>\n

Do I Need a CPA<\/span> or a Tax Preparer<\/span>?<\/h2>\n

It depends on the level of complexity of your business. Business owners<\/span> with simple tax filing<\/span> needs can rely on a tax preparer<\/span>. However, for tax planning<\/span> and more elaborate tax situations<\/span>, a specialized CPA<\/span> will be able to offer higher level advice, including financial planning that goes beyond calculating a businesses\u2019 tax liability<\/span>.<\/p>\n

John Scott, CPA<\/span> and Partner in Tax at Anders CPA<\/span> + Advisors, explains the difference in this way, \u201cA tax preparer<\/span> is historical in nature. They fill out tax forms<\/span> based on what happened. A CPA<\/span> is a trusted adviser who not only does the historical case but also advises you about your businesses\u2019 future.\u201d<\/p>\n

To learn more about our services, schedule a free Virtual CFO consultation below.\u00a0<\/p>\n

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