The short explanation lies in the statement all CPAs are accountants, but not all accountants are CPAs.
While it’s easy to get the two confused, what’s most important is to understand that a CPA is a certified professional that must take a multi-part exam, and, that this certification status allows a CPA to do things for you that an accountant legally and ethically cannot.
Below, we break down the the key things a CPA can do that an accountant can’t.
1. A CPA can Interact with the IRS on Your Behalf
Form 2848 gives CPAs the legal right to represent taxpayers in front of the IRS. General accountants cannot represent taxpayers since they do not fulfill the legal requirements set by the IRS.
Courtesy: The IRS
There are many instances where you would want a CPA to interact with the IRS on your behalf, but some of the common ones are:
- Defending your tax return
- Managing an IRS audit
- Penalty relief
- Adjustment of assessment
- Claiming refunds
- Voluntary disclosures
- Asset forfeiture
- Collections and/or bankruptcy
- Responding to IRS notices
- Providing clarifying information to the IRS
If the IRS sends you a notice or wants to audit your financials, you can fill out Form 2848 to give a CPA legal right to defend your returns and face the legalities on your behalf.
Moreover, a CPA follows a complete legal code of conduct to maintain the confidentiality of your financials while an accountant is not legally required to.
2. A CPA Can Sign Your Tax Returns
Government law requires a taxpayer to sign their tax returns whenever they file their taxes. A CPA has a legal right to sign your tax returns, but, an accountant cannot sign your returns.
In normal conditions, a taxpayer himself signs his tax returns, however, in specific conditions you need a third person to sign on your behalf.
For example, if you are outside of the U.S., or suffering from a disease or an injury, the IRS gives you the flexibility to take advantage of a third person to sign tax returns on your behalf.
A regular accountant does not hold the credibility to sign these tax returns, however, the CPA holds a legal position to sign your tax returns by following the legalities.
3. A CPA Can File Reports with the SEC
The Securities and Exchange Commission works to ensure transparency and accountability, and utilizes the information it receives to provide clear information to investors, analysts, regulars, and, at times, the general public. All public companies must prepare financial reports according to a standard set by GAAP and then file these reports to the SEC.
A CPA can audit and review financial statements, provide reports to the SEC, something a general accountant cannot do.
4. A CPA can Audit a Public Company
While a general accountant can conduct an in-house audit of a privately held company, for public companies and companies requiring a third-party audit, this is something only a CPA can do. This is partly due to the number of stakeholders and position a public company has in the market.
Auditing financial statements of a public company and attesting also come under the duties of a CPA and a regular accountant can not do that.
Attesting a document implies that the numbers are accurate and reliable. Since a CPA can legally attest to the financial statements of a company, it gives people more authority to hold him accountable as compared to a regular accountant.
5. Other Factors To Consider
While there is overlap in what a CPA and a general accountant can do—namely, bookkeeping, ledger, day-to-day budgeting and reporting—there are other considerations to make in distinguishing between CPAs and accountants. A CPA must pass a four part exam within an 18-month window. These sections include Auditing and Attestation, Business Environment and Concepts, Financial Accounting and Reporting, and Regulation. CPAs are also governed by a licensing body, the AICPA, and must present their license number to individuals who request it.
In short, a CPA has a higher command of the regulations and impacts of their work, and greater obligation to conduct their duties in accordance with governing bodies.
