As a small business owner, you’re looking for some assistance with your finances. Each tax season, things feel more and more complicated. The worst part is, getting help with your taxes feels just as complicated as doing them! How are you meant to know what type of accounting professional is best for you and your business?
A CPA is a Certified Public Accountant, and they’re equipped with the level of experience and skill that your business deserves.Though CPA’s can come with a higher price tag than other accounting options, this is due to the additional educational, work experience, and testing requirements it takes to receive certification.
A CPA has specialized credentials that set them apart
The CPA exam is administered by the National Association of State Boards of Accountancy (NASBA), but to become licensed you must meet the specific requirements of your state’s Board of Accountancy. Usually, this entails:
- A university degree in accounting, which usually requires an additional year of study past getting a typical Bachelor’s degree
- Passing the uniform CPA exam, which is one of the most challenging professional exams that currently exists and can take over a year to complete
- One or more years of work experience under a licensed CPA, which usually requires focus in several specific areas of accountancy
- Passing a national and/or state professional ethics exam
- Submitting an application to a state board of accountancy and providing evidence that the aforementioned requirements were met
After you become a licensed CPA, you usually have to take several weeks of Continuing Professional Education (CPE) per year, and must renew your license with the state board of accountancy periodically.
It is no small feat becoming a CPA, and I can attest from my own experience that it was one of the most challenging experiences I’ve ever gone through. The certification and requisite work experience has undoubtedly set me apart from other non-CPAs who work in the accounting profession.
Other accounting professionals won’t meet all of your needs
There are many non-CPA accounting professionals who are very good at what they do. Some examples are:
- Bookkeeper: as the name suggests,a bookkeeper is the keeper of the books. They’ll perform a variety of accounting tasks like reconciling your accounts with reported transactions, accounts receivable, accounts payable, and payroll. A bookkeeper doesn’t need a formal education or certification, though there are some college programs and certified bookkeeping designations like the American Institute of Professional Bookkeepers (AIPB).
- Tax Preparer: A tax preparer is someone who calculates, files, and signs income tax returns on your behalf. Similarly to bookkeepers, they don’t need any formal education or certification. They do, however, need a Preparer Tax Identification Number (PTIN) issued to them by the IRS. This takes about 15 minutes to apply for on the IRS website.
- IRS Enrolled Agent (EA): The IRS describes an enrolled agent as a person who has earned the privilege of representing taxpayers before the Internal Revenue Service by either passing a three-part comprehensive IRS test covering individual and business tax returns, or through experience as a former IRS employee.Out of all these examples, EA is the most difficult designation to get.
A simple tax situation requires only simple solutions. If you have a W-2 and own a home with a couple children, a tax preparer or even accountancy software will likely meet all of your needs. However, as your circumstances become more complex, so too should your solutions. Your business requires more intricate financial functions than the above professionals usually provide, which is why we recommend hiring a CPA.
A CPA does more than tax compliance
If you’ve heard of a CPA before, you might think all we do is prepare tax returns. We don’t blame you! You’re not an accounting professional, so it makes sense you don’t know the ins and outs of what we do. But our role extends far beyond tax preparation and compliance. Some areas we specialize in outside of tax are:
- Financial statement audits, reviews and compilations
- Internal control testing
- Management consulting
- Mergers and acquisitions
- Forensic accounting
- Managerial accounting
A CPA can help spot opportunities for your business, avoid pitfalls, and keep you heading down the path to achieving your goals. You don’t want someone who shows up just as tax season rolls around, does their job, and you don’t hear from for another 12 months. You want – and deserve – a year round tax advisor who will go above and beyond for you and your business.
A CPA can represent you in front of the IRS
If you receive a routine IRS notice or are the subject of an IRS audit, not any tax or accounting professional can represent you in front of the IRS. Only a CPA, attorney or Enrolled Agent (EA) can represent you. Given that the nature of dealing with the IRS is very complicated, having the right professional represent you can save significant amounts of money, time, and stress. Even if you use a CPA, attorney or EA, they may not have the right experience for dealing with the IRS, so make sure to ask them questions and make sure they have a good track record of representing their clients in front of the IRS.
A CPA can save you a significant amount of money and time when you are starting up
When you start up, you will likely have many questions about what is deductible and if you can take any tax credits. You also have to determine which legal entity you would like to be structured as. Different legal entities have different tax implications, so if you hire a good CPA off that bat who evaluates the best choice of legal entity for you from a tax perspective, it could save you a significant amount of money over time.
At the beginning, a CPA can also help you make the decision about the method of accounting you will use for tax purposes: the cash method, the accrual method, or some hybrid method of both. This decision will have a lasting impact on your business and is very expensive and time consuming to change.
If you are getting a loan to start your business (like an SBA loan), there is some very specific accounting that must be done and requirements that must be met. If you have a good CPA coaching you through the process, you will save yourself a lot of time and aggravation.
If you’re ready to feel confident about your business’ finances all year round, learn more about Black Sheep Accountants here.