A CPA provides expertise in the financial industry. Businesses often hire them to manage tax planning, financial forecasting, and defending any issues in front of the IRS.
However, in most cases, a CPA’s role does not get a lot of attention, especially since they usually operate in advanced, highly-regulated areas where only the experts know the true risks and complexity.
Businesses get tremendous value by relying on the expertise of a CPA. Here, we cover 5 underrated benefits of hiring a CPA.
1. You Can Avoid Accidental Fraud
Accidental fraud refers to the activity in which you are not intentionally making any mistake in your financial flows, but the activity is considered fraudulent.
For example, you incurred a mistake in your financial transactions and the yearly revenue in your accounts lowered your tax brackets. Or, you wrote off a home office incorrectly because you didn’t know the requirements. You paid the incorrect due taxes.
Later, the IRS audits your transactions and it appears that you reported incorrect transactions that lowered your taxes. In such cases, the IRS may sue you for reporting fraudulent financial data.
These accidental frauds are common especially when individuals do their own taxes or rely on tax preparing software that doesn’t offer guidance on regulations, but they can also occur when an accountant (not a CPA), isn’t up to date on the requirements specified by the regulatory institutes.
Since a CPA is highly trained and remains compliant with all the standard rules, he can help find such discrepancies in the financials of the company, or, appropriately advise you as to the rules for how to write off things like offices, vehicles, and meals.
2. Your CPA Can Defend Your Return with the IRS
A CPA has legal autonomy to represent his client in front of the IRS. Moreover, he or she can defend your tax returns if the IRS audits your financials, finds discrepancies in your financial data, or asks for clarifying documents and paperwork to be sent in.
In addition to defending your tax returns, following are some of the instances where a CPA can be of tremendous value:
- Managing an IRS audit.
- Claiming refunds when you have overpaid the taxes.
- Responding to all the concerns on your financials by the IRS.
- Providing positive evidence on your financials to the IRS.
- Asset forfeiture
The IRS has a dedicated Form 2848 that needs to be filled out both by the taxpayer and your CPA in order to do this.
3. You Get a Team of Experts Working on Your Financials
The best method to produce efficiency in the system is to dedicate the right person to the place. This saves time, produces results, and makes the system effective.
A CPA works with a team of experts who are specialized in various fields related to the financial industry, so when you hire a CPA, you’re not always just getting one person involved. Sometimes, you’ll get a team with varying expertise who can help you with whatever you need.
For example, if you consult a CPA to file your tax returns. The CPA can have an accountant or other CPA in the firm who is compliant with all the standard rules set by the IRS, to review your financial statements first. Another member of the team may be preparing your monthly financial statements on behalf of your CPA, or offering expertise in specific industries like real estate and crypto.
This helps save you from accidental fraud, financial errors, and means you’re getting the best service for your money.
Furthermore, a CPA reviews your financials with a rigorous process before filing your tax returns. He or she will ensure that each step in the process has been verified by an expert who is compliant with the rules specified by the IRS.
Every single person on the team dedicates his expertise to assist you with the best services.
4. You’ll Avoid Overpaying (or Underpaying!) Your Taxes
With the guidance of a CPA, you can find the right tax strategy for your business and adjust as your business ebbs and flows. Since the IRS has complex rules, you might be confused about determining the accurate tax you owe.
Moreover, since you have a unique financial flow, it is possible that you find yourself in difficulty while calculating your total income for taxes. This can lead you to overpay or underpay your taxes.
To avoid the hassle, CPAs can help you to understand the tax credits, deductions, and regulations by the IRS. This lowers your tax bracket, and you can avoid paying extra money on taxes.
This may also help you to avoid paying any penalties for underpaying your tax return. Moreover, you may claim a refund for overpaying your tax returns.
5. You Can Get a Broad Overview or as Much Detail as You Need
Each company-CPA relationship is different. Some industries require outside audits for compliance. Others need a CPA to manage inventory. The great thing about working with a CPA is the range of reporting they offer. You can take a step back and just review monthly and yearly accounting statements, and request detail where you might need it. This allows you to get a broad overview and hard numbers on where your business is at without having to monitor and track all the details.
And, if ever you want or need to dig in with more details, your CPA can provide you with what you need.
Bonus: You Don’t Need to Worry About Signing Your Tax Returns
Since CPAs are state-granted licensed accountants, they are authorized to represent their clients before the IRS and sign their tax returns.
For example, you are out of the country, you get sick or you get an injury, and you can not sign your tax return yourself, you can choose a CPA to sign your tax return on your behalf.
It is also important to note that ONLY a CPA can sign a tax return since they hold the legal authority to represent you in front of the IRS.
