CPAs are tax professionals that can file taxes for your company, provide crucial financial advice, and even help you save money. Despite having degrees in accounting, certified public accountants are not the same as regular accountants.
CPAs have earned a state license after passing the Uniform CPA Exam, a demanding examination that assesses knowledge of tax law and normal accounting procedures. (Ethical criteria are also included in the state license.)
To keep their license, they need to complete professional education courses; if they are found guilty of fraud, carelessness, or ethical transgressions, they risk losing it. Additionally, CPAs can bargain on your behalf with the IRS since they have unrestricted representation powers.
Accountant vs. CPA
A person with a bachelor’s degree in finance or accounting is known as an accountant. An accountant with a bachelor’s degree who has obtained more honors since graduating is a CPA.
An accountant must pass a Uniform CPA Exam, have job experience, and fulfill all state licensure criteria in order to become certified. Their understanding of business, accounting, taxation, and auditing is covered in the test. Continuing education courses are also necessary for CPAs to keep current on rules and regulations throughout their careers.
A CPA, as opposed to an accountant, has a fiduciary duty to their clients as a result of this qualification. Accordingly, a Cambrean CPA is legally obligated to operate in their customers’ best interests, while regular accountants are not licensed to do so.
Although certified public accountants are a specialized subset of accountants, only around half of accountants hold a CPA license.
What Does a Certified Public Accountant Perform?
CPAs can serve in a variety of capacities for your fledgling company. Among other things, they manage bookkeeping, financial planning, tax filing, and the preparation of crucial financial records (such as tax paperwork and profit-and-loss statements).
As your company expands, they may also offer wise financial counsel so you can focus on managing your enterprise. The general duties of a certified public accountant are as follows:
- Tax preparation, filing, and guidance
- Financial and tax compliance advice
- Accounting for forensics
- Bookkeeping and Payroll
When Is the Right Time to Hire a CPA?
To make use of their expertise in corporate finance, you don’t have to engage a certified public accountant on a full-time or even part-time basis. A lot of certified public accountants provide consulting services. You should think about employing a CPA in the following situations:
Launch Your Company
The thought of spending hundreds of bucks for a few sessions with a certified public accountant may seem excessive when you’re starting a business while money is tight. It is, nonetheless, an investment (and a deductible expense), much like many other beginning fees.
You may steer clear of blunders by establishing your firm using the assistance of a CPA. A certified public accountant can help you make the following decisions when you launch your company:
Your company’s organizational structure: Your company’s ideal business structure might be suggested by a certified public accountant. Your tax, liability, and reporting obligations are influenced by the legal form you choose to set up your business—sole proprietorship, partnership, LLC, corporation, or co-op.
Later on, it may also be challenging to modify. You might need to tell your bank as well as insurance company, reapply for permits, or obtain a new employment identification number if your business structure changes.
Your method of accounting: A certified public accountant can assist you in deciding if accrual or cash accounting is more appropriate for your company. Which form of accounting you employ is one of the first things your accounting software asks when you set it up.
Cash accounting is typically used by young firms since it is easier to understand. The IRS does, however, demand accrual accounting in some situations, such as when you sell products to customers and keep inventory. The accrual system, which records revenue and costs as they are billed rather than as soon as the money is received, offers an alternative.
CPAs can prepare for tax time, tax records, submit tax returns, and plan how to reduce your next year’s tax obligation. Another crucial factor is that CPAs (https://www.franklin.edu/blog/accounting-mvp/what-is-a-cpa-exactly-what-does-a-certified-public-accountant-do) can act as your representative if the Internal Revenue Service has concerns about your tax return or in the event you or your company are audited.
Personal and business taxes are not the same. If your financial circumstances are complicated, you might wish to engage a certified public accountant (CPA), even if you have previously filed your taxes yourself.
Employing a certified public accountant (CPA) to file your taxes, for example, might save you time and stress if you hire staff or sell goods to clients in several states or nations.
CPAs can also help you complete your taxes in the following ways:
Tax law compliance: CPAs assist you in comprehending and adhering to tax changes. A certified public accountant can assist you in determining whether and how changes to the tax code are impacting your company, as was the case with the provisions of the Tax Cuts & Jobs Act.
Reasonable deductions: CPAs assist you in determining the deductions you are eligible for. You don’t want to make dubious deductions and lead to an audit, but you also don’t want to incur as many exclusions as you are allowed. You can get advice from a certified public accountant on when to take certain deductions.
You may require the counsel of a certified public accountant in the following situations:
Home office deductions: Knowing which startup expenses are deductible is important when you’re launching a firm. For example, what does the IRS classify a home office in tax terms?
Or should your company own your car if it’s mainly used for work? Does your company pay for your mobile phone? Which expenditures are deductible if you take an official trip and prolong it for a couple of vacation days?
Particular Conditions
There can be some situations when you manage your company where you require the knowledge of a certified public accountant. For instance, you should employ a certified public accountant to defend you if the IRS notifies you in writing that you are being audited.
Additionally, if the IRS reaches you just to ask for more details on your return. CPAs can assist you in responding effectively, providing the IRS with the information it requires, and resolving the matter as amicably as possible since they have expertise working with the IRS.
