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.