Have you ever wondered what a CPA does and how they can help your business thrive? With over 478,783 Certified Public Accountants employed in the United States, according to Zippia, it’s clear that businesses see immense value in their services.
But, do you need one? If you’re a business owner struggling with bookkeeping, accounting, or tax preparation, this article will answer your pressing questions and help you understand why a CPA might be essential for your success.
What is a CPA and How is it Different from an Accountant?
What Exactly Does a CPA Do?
A Certified Public Accountant (CPA) is an accountant who has passed the Uniform CPA Examination and meets stringent licensure and work experience requirements set by state boards of accountancy. The CPA designation signifies expertise in areas such as audit, tax planning, financial planning, and forensic accounting. To become a CPA, one must pass all 4 sections of the Uniform CPA Examination and often meet additional requirements such as work experience and an ethics exam.
What sets CPAs apart from general accountants is their ability to represent taxpayers before the IRS, perform complex audits that are compliant with Generally Accepted Accounting Principles (GAAP), and provide expert financial advisors on financial decisions. Their rigorous training and certification ensure they are equipped to handle sophisticated financial documents, making them invaluable to businesses that require precise and reliable financial information.
CPA vs. Accountant: What’s the Difference?
The primary difference between a CPA and a general accountant lies in the CPA’s rigorous training and the legal authority they hold. While a general accountant can prepare your financial records and help with income tax filings, a CPA is an accountant who must pass the Uniform CPA Examination, adhere to strict licensing requirements set forth by their state’s board of accountancy, and maintain ongoing education to stay current with laws and regulations that are subject to change.
This professional designation means a CPA can perform audits, represent you before the IRS, and ensure your financial practices are compliant with the latest tax code and regulatory requirements. If you’re looking for someone to offer high-level financial planning, review complex financial documents, or provide strategic advice for your business, a CPA offers a level of expertise that goes beyond what a general accountant can provide.
Further Reading: Find the best accountant for your small business with tips on choosing the right tax preparer
Why Every Business Needs a CPA: Key Benefits
How Can a CPA Save You Money?
A CPA serves as your financial partner, constantly looking for ways to reduce your tax liability and optimize your business's financial performance. Through expert tax planning and a deep understanding of the tax code, CPAs can identify deductions and credits you might overlook, saving you significant amounts on your tax returns. They help by preparing financial projections and analyzing financial data, which helps prevent costly errors and penalties, ensuring your business remains in good standing with the IRS.
Beyond tax season, CPAs offer ongoing financial strategies that can lead to long-term savings. Whether it's optimizing your cash flow, guiding you on ways to improve profitability, or helping you navigate complex laws and regulations, a CPA’s advice can make the difference between a good year and a great one.
What Services Can a CPA Offer Beyond Taxes?
CPAs do much more than just tax returns. Their services extend to auditing your company’s financial statements, ensuring that your financial reporting is accurate and compliant with GAAP. This is particularly important if your business is seeking investors, loans, or looking to ensure transparency with third-party stakeholders.
CPAs also specialize in various areas such as forensic accounting, where they investigate financial discrepancies, and financial planning, helping you make informed decisions about your business’s future. They can provide valuable insights into financial documents and ensure your business complies with all necessary regulatory requirements. Whether you need help with tax tips or strategic business advice, a CPA brings a breadth of knowledge and experience that supports your business’s success on multiple fronts.
Further Reading: Discover why you should have the same accountant do your taxes and bookkeeping
How to Choose the Right CPA for Your Business
What Should You Look for in a CPA?
When choosing a CPA, start by verifying their CPA licensure. Each state’s board of accountancy sets forth requirements, and a CPA candidate must meet these to practice. This ensures that the CPA candidate has passed the Uniform CPA Examination and completed the necessary self-study and work experience. But qualifications are just the beginning.
Look for a CPA who has experience in public accounting and understands the specific needs of your industry. For instance, if you’re in a niche market, a CPA who specializes in that area can be invaluable. Industry-specific experience means they’re familiar with certain tax regulations that affect your business, making them a better advisor.
Don’t forget to check references and client’s testimonials. Ask other business owners about their experiences to ensure the CPA’s expertise aligns with your needs. It’s also wise to consider their affiliation with professional organizations like the American Institute of Certified Public Accountants (AICPA) or the National Association of State Boards of Accountancy, as this often indicates a commitment to ongoing education and ethical standards.
What Questions Should You Ask Before Hiring a CPA?
To find the right CPA, you need to ask the right questions. Here are five critical ones:
- What is your experience in public accounting and with businesses like mine? Ensure they have relevant industry experience and understand the unique challenges of your business type.
- How do you keep up with changes in tax laws and regulations? With tax laws subject to change, it’s essential that your CPA stays informed. Their involvement with organizations like the AICPA can be a good indicator.
- What is your fee structure, and what services does it cover? Fees can vary based on services provided. Clarify whether their fees include everything from tax filing to personal financial planning.
- How do you prefer to communicate and how often? Your CPA should have a communication style that suits your business. Some public accounting firms offer more hands-on approaches, while others may be less frequent in their updates.
- Can you provide references or testimonials from clients? References from similar small businesses or industries can give you confidence in your choice.
Common Misconceptions About CPAs and Accounting Firms
Is Hiring a CPA Only Necessary for Large Businesses?
A common misconception is that only large corporations need CPAs, but in reality, small businesses often work with CPAs and benefit even more. CPAs are not just for big firms; they are vital for self-employed individuals and small business owners who need expert financial advisors to help navigate complex financial waters. Whether you’re reviewing financial statements, planning for growth, or managing personal financial matters, a CPA’s expertise can make a significant difference.
CPAs often work with businesses of all sizes, offering services tailored to their specific needs. This might include everything from routine bookkeeping to specialized tax planning. As your business grows, the role of a CPA becomes even more critical in helping you scale effectively.
Do All Public Accounting Firms Offer the Same Services?
Not all public accounting firms offer the same services or level of expertise. The services provided can vary based on the firm’s size, specialization, and client focus. For example, some firms might specialize in tax issues for small businesses, while others might focus on forensic accounting or working with large corporations.
When choosing an accounting firm, it’s important to select one that aligns with your specific business needs. Larger firms may have more resources, but smaller firms might offer a more personalized service. Consider what’s more important for your business: broad resources or a tailored approach. Your decision should be based on the specific services you need and the level of attention your business requires.
How Can Taxfyle Help You Find the Right CPA for Your Business
Choosing the right CPA for your business is essential, especially considering the diverse career paths in accounting. Taxfyle connects you with an accounting professional who has successfully passed the uniform CPA exam, a requirement in many states require for licensing. The CPA exam is rigorous, and candidates to pass must demonstrate a high level of expertise compared to standard exams.
This ensures your chosen CPA is well-prepared to handle your financial needs. Unlike enrolled agents, CPAs have met additional requirements that require CPA candidates to maintain their credentials, making them ideal for managing your organization's finances.
Further Reading: Explore the pros and cons of DIY tax software versus hiring a CPA
Key Takeaways
- Expertise: A CPA (Certified Public Accountant) brings specialized financial knowledge, making their accounting career essential for your business.
- Compliance: Ensures your business complies with tax laws and financial regulations, leveraging their accounting career expertise.
- Strategic Advice: Provides strategic financial planning to help grow and manage your business effectively, rooted in their extensive accounting career.
How can Taxfyle help?
Finding an accountant to file taxes is a big decision. Luckily, you don't have to handle the search on your own.
At Taxfyle, we connect you with licensed, experienced CPAs or EAs in the US. We handle the hard part of finding the right tax professional by matching you with a Pro who has the right experience to meet your unique needs and will file your file taxes for you.
