While a lot of small businesses utilize the help of accountants for advice on tax and financial planning, most of them are unaware of the limitations of being represented by a general accountant. An accountant is simply a finance/tax professional who conforms to the guidelines of the Generally Accepted Accounting Principles (GAAP) as set by the Financial Accounting Standards Board (FASB). A Certified Public Accountant (CPA) on the other hand is a state licensed professional who comes under the category of ‘enrolled preparers’ in the IRS. This means they can represent small businesses at IRS audits whereas general accountants don’t bring in much weight. Let’s have a look at the many advantages of hiring a CPA for your business!
CPA is an IRS recognized tax advisor
The IRS categorizes tax and financial professionals into various categories. Broadly speaking two of them which are, enrolled and unenrolled preparers. While general accountants come under the latter, professionals such as attorneys and CPAs come under the first category which comes conferred with significant business representation at IRS audits. CPAs are required to take rigorous exams by the state and this is an affair of continuous assessment. Which means that they can lose their license at any point if found to be incompetent. This entails that CPAs are well informed about current tax laws and therefore in a better position to advice your business than an accountant, enrolled agent and tax preparer. This does not mean that accountants are bound to give you bad advice. It just means that with the training constraints the CPAs go through, your business will have better professional on side with an assurance of certification and real time advice.
CPA: making small business accounting more accountable
This does not refer to the innate nature of the CPAs but rather to the nature of their job at hand. Meaning, whenever a CPA makes suggestions or acts, they are putting their licenses on the line. This means that they can be held far more accountable than your average general accountant.
Expect a more in-depth analysis
Given the degree of rigorous assessment that CPAs are put through by state accountancy boards, their ability to carry out a detailed financial analysis far exceeds that of an accountant. Most small businesses have bookkeepers that record all financial and tax inputs typically into tax preparation software packages. The role of an accountant or CPA begins here. With accountants however, their roles primarily involve doing a superficial analysis of the inputs and preparing the returns to be filed. CPAs however are generally more competent at digging into the details for an analysis. This is often useful as it is this attribute that confers the power of representing a business at an IRS audit to the CPA. They are capable of both representing and executing claims on your behalf in addition to helping you make more complex and high-level business decisions.
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Delegating between bookkeeping and CPAs
While hiring CPAs are more expensive to hire, they are well worth the money as this is compensated by your tax savings and clear tax trajectories for your business. Moreover, it is advisable to segregate the job and allocate the more routine documentation and tax preparation to the bookkeepers and accountants and leave the analysis of your inputs to the advice of a CPA. Finally, once prepared, have your CPA sign off on your returns for the security of having certified tax returns.