Whether you’re starting a business or have been working for years, you probably have asked this question. Wegmann Dazet Senior Tax Manager Richard Tullier answers the above and, just as importantly, why should you care?
You hear people toss around these titles (bookkeeper, tax preparer, CPA) or talk of “their” person who is one of the roles, but what is really the difference? Sometimes it’s an ocean, sometimes it’s a wading pool; it just depends on what you need.
First, let’s dispel a common myth: in fact, not every CPA is a tax preparer, nor is every tax preparer a CPA, and not every bookkeeper does taxes. Each role serves a valuable function and can be useful in your business. Someone might be one or all of these, and a company could have all of them onsite. Now that we’ve covered that, let’s get to the heart of the difference and why it matters.
We’ll start with the bookkeeper, as this likely will be your business’s first need. In some cases this is you, your spouse, other family, or a friend, and in other cases it’s an outside professional. A bookkeeper is that person who does just what the name says: keeps track of the books, the cash flow, what you owe, who owes you, and helps keep you out of the doghouse with your customers, creditors, and your bank. This person often tends to be less costly per hour than the other two roles while they do day-to-day tasks – writing checks, handling cash in and out, and making deposits, for example.
Next is the tax preparer. Now that your business’s books are complete, or you’re an individual who simply needs help preparing taxes, you look to this person. Some tax preparer businesses you only hear from during January to April, with offers to do your taxes cheaper or with guarantees of a maximum refund (side note: when you see ads like this, always remember what your mama told you – Nothing is free and there are no guarantees in life). While many of these tax preparers are seasonal, other preparers don’t just do tax returns January through April and then stop working the rest of the year. Tax returns are due year round. Some tax preparers are busy doing not just income taxes but also payroll taxes and other accounting-related tasks. If you need someone to help you a little more than TurboTax, you might look to a tax preparer. Be careful: while some preparers are Enrolled Agents (an IRS designation), many others offer tax preparation services without an official certification. Bottom line with this role, you are not required to have a certificate to prepare taxes.
The final category is the CPA, Certified Public Accountant, which I believe to be the best (granted I’m biased since I am one). The biggest difference between a CPA and the others is what those three letters represent. This designation is earned after years of schooling and specific courses required both by the AICPA (the governing body of CPAs) and by state boards of accountancy that regulate the profession. CPAs undergo one of the toughest professional exams and must take mandatory annual continuing education (CE) as well as ethics courses in many states. In Louisiana, for example, a CPA averages 40 hours of required CE per year, whereas attorneys are required to have only 12.5 hours of CE annually. As a profession, CPAs can do all of the above. Some specialize and only do taxes or financial work, and some do only audits; others act as bookkeepers, and some do payroll, and there are many other specialties, and many do them all. We don’t just do data entry with taxes, but we can review and advise, and find potential deductions and revenue deferment, for example. But in general, a CPA is going to be able to serve all roles, and help you get to the next level.
Struggling to decide which role fits? Please email us or give us a call – we are happy to discuss your needs!
Latest posts by Richard Tullier, CPA
- CPA, Tax Preparer, Bookkeeper – What’s the Big Difference? - December 4, 2019
- A Simple Change Can Defer a Bit of Your Tax Burden - October 28, 2019
- Beating the $10,000 State Tax Deduction Cap - September 19, 2019