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Archives for December 2023

CPA vs. Tax Preparer: What’s the Difference?

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Once the calendar flips to a new year (and you’ve barely had a chance to recover from the busy holiday season), Uncle Sam will come knocking at your door to get his share of your taxable income.

Tax season will be here before you know it. But unless you’re a mathematical savant who revels in the joy of crunching numbers and interpreting tax laws, chances are you lean on the sturdy shoulders of a tax professional.

While both Certified Public Accountants (CPAs) and tax preparers are professionals authorized to prepare and file tax returns, their training, certifications, expertise and scope of services vary greatly. So who’s the right candidate?

Here’s a quick rundown to help you hire the ideal tax professional:

Tax preparer

Tax preparers have no college degree requirement, and many lack tax-specific training. In fact, the only pre-requisite for obtaining the required (PTIN) to file taxes on your behalf is the completion of a simple form — one that takes about 15 minutes to fill out.

Why choose a tax preparer? If you or your small business only need assistance filing simple tax returns, they’ll typically apply the most common deductions and tax credits to your return — things like deductions for educational expenses and health care costs, as well as earned income or retirement tax credits. But what they may not do is research more unusual tax credits and deductions.

You can count on them to:

  • Collect relevant financial records and input applicable tax data
  • Determine basic deductions, refunds and payments using federal state and local tax laws
  • File documents with the IRS
  • Offer best steps to take to reduce your tax liability for the coming year

CPA

CPAs, on the other hand, must undergo extensive education and ongoing training to obtain their certification and ensure they’re responsible fiduciaries:

  • Completion of bachelor’s degree program, including 150 credit hours with a concentration on accounting, business and general ed
  • Passing of the AICPA (American Institution of Certified Public Accountants) exam, covering business concepts; accounting and reporting; auditing and attestation and regulations, within 18 months of completing their undergrad degree
  • Licensure by their individual state(s)
  • Annual completion of 40 hours of continued education

Because they have advanced training, CPAs are authorized to represent their clients before the IRS. They also tend to have greater insight into complex tax positions and are well-equipped to assist clients well beyond the tax return, with investments, audits and financial planning.

In addition, CPAs can provide the following services:

For individuals:

  • Estate planning expertise
  • Wealth preservation
  • Budget management and analyses
  • Investment strategy and asset allocation
  • Charitable giving strategies

For businesses:

  • Bookkeeping duties
  • Forensic accounting
  • Cost segregation analyses
  • Financial reporting
  • Audit and assurance services

The choice between a CPA and a tax preparer depends on your unique financial circumstances. Whether you’re a self-employed individual seeking comprehensive financial guidance, a growing business that could benefit from tax planning, or a salaried executive with stock options, there is a professional who can meet your needs.

If you’re looking for a trusted CPA, the professionals at Magone & Company will consider every deduction, break and incentive in preparing your return. Call us today at (973) 301-2300 to schedule a confidential consultation.

Minimize Your Company’s Tax Liabilities: 7 Tips for CFOs

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Today’s CFOs have a lot on their plates. Ensuring that your company remains financially healthy and compliant with tax regulations is a complex and time-consuming process — and that’s just a small part of the role.

So how do you keep up, while minimizing your company’s tax burden?

  1. Brush up on current laws. One thing is for certain each and every tax year — change. To avoid penalties and minimize liabilities, stay informed on tax law updates and regulations that may impact your business, maintain a broad understanding of the tax code and know how to apply applicable provisions.
  2. Take advantage of available tax credits and deductions. Identify and claim any appropriate tax credits to help offset your tax liability and reduce your overall tax liabilities. From the R&D tax credit to the work opportunity tax credit, look for avenues to save. Be the expert on tax deductions, including those for business-related expenses and depreciation. And make sure your business is structured in a way to minimize its tax burden. For example, does it make more sense to run as an S corp, C corp or an LLC?
  3. Review current practices. Are your bookkeeping and accounting practices an accurate reflection of your company’s finances? Are you keeping detailed records of income, expenses, investments, while reconciling your accounts regularly? Even small errors can have a huge impact when it’s time to file your company’s tax returns.
  4. Implement added measures. Consider adding new processes that offer increased visibility into your company’s’ financial performance. From enhanced budgeting and forecasting to strategic cash management practices, these tax optimization strategies can help limit your liability and allow for smarter tax planning.
  5. Simplify payroll tax reporting. You don’t have to do it all. To save time and remain compliant, you may utilize a reliable payroll system to handle tax filings, payroll calculations and deductions on your behalf.
  6. Leverage technology. CFO are increasingly being asked to step up in tech and automation, and for good reason. Thanks to automation, you can free up time and resources from often mundane tax-related tasks. Many accounting software solutions offer features specifically designed for tax reporting to help optimize the tax preparation process.
  7. Foster a cohesive team. Communication should extend beyond the C-suite. Tax considerations and challenges can be handled more proactively when your finance team, tax advisors and other stakeholders work together and maintain open lines of communication and collaboration. And when every employee understands how their role plays into the bigger picture, they’ll be more committed to helping the company be successful.

Make the most of your CPA relationship

Magone & Co can help organizations like yours operate more efficiently — navigating complicated tax laws, identifying potential deductions and ensuring ongoing compliance. Get in touch to see how we can help.