CPAs vs. Tax Preparers. Which is better for your business.

As a small business owner, you always want to do what's best for your business. This includes making the perfect hires, selecting the right vendors, and choosing the best person to do your taxes. But which is best for your business, a CPA or a tax preparer?

Use this blog as your guide to understanding what a CPA and tax preparer is, how they differ, and why you should choose one over the other for your unique tax situation. Using a tax professional can save you thousands annually, so selecting the right person or team is essential. 

What is a CPA?

Certified public accountants, or CPAs, are often used by businesses and individuals for preparing taxes. They have unlimited practice rights, meaning CPAs can address all tax matters with the IRS, regardless of whom they represent.

CPAs can only practice in the states they are licensed in and can provide additional tax-related services, such as long-term planning and audit protection. 

CPA certifications

CPAs must pass the Uniform CPA Examination, complete a study in accounting at a college or university, and meet the experience and good character requirements established by their respective boards of accountancy. CPAs also comply with ethical requirements and complete specified levels of continuing education to maintain an active license. 

What is a tax preparer?

Anyone can be a paid tax preparer if they possess an IRS Preparer Tax Identification Number. Tax preparers can have different skill sets, education, and expertise.

Licensed tax preparers are required to pass the Special Enrollment Examination and complete 72 hours of continuing education every three years. Once all requirements are met, tax preparers become enrolled agents.

Tax preparer certifications

Tax preparers with an active preparer tax identification number but no professional credentials are authorized to prepare tax returns. Unlike CPAs, they have no authority to represent their clients before the IRS. 

Main Differences between a CPA and Tax Preparer

CPA Tax Preparer
Educational Requirements Bachelor's degree. 150 hours focusing on accounting and business

Uniform CPA Exam 
No college degree required

Special Enrollment Examination 
Professional Experience  One to two years  None
Continuing Education  40 hours per year 72 hours every three years
Expertise Taxes, audits, litigation services, and more Taxes

Which type of tax professional is right for my business?

The tax professional you choose must possess the necessary skill set to prepare and file taxes on your behalf with the IRS. They will handle sensitive personal information, including your marital status, income, children, and your social security number, so they must be ethical and trustworthy. 

Why choose a CPA for my business?

Choosing a CPA would be optimal if your small business would benefit from a suite of accounting services beyond tax preparation, such as long-term tax planning or audit protection.

Why choose a tax preparer for my business?

If your small business doesn't require services beyond tax preparation, you will benefit from choosing a tax preparer for their service. 

Tax preparer vs. CPA FAQs 

Is a CPA better than a tax preparer?

A CPA and a licensed tax preparer should deliver similar results when preparing taxes. What's "better" comes down to your unique tax situation and business needs. If all you need is tax prep, either will do. But if you need more, CPAs offer a lot of value beyond tax preparation to your small business.

Is a CPA more expensive than a tax preparer?

Pricing will vary, with some firms priced more competitively for tax preparation than others. Additional CPA services will cost more. 

Work with Tax Professionals for Your Small Business Needs

Preparing and filing taxes is complex, whether you use a CPA, licensed tax preparer, or accountant for your small business. Sometimes knowing who to use can be difficult, which is where 1800Accountant can help with small business taxes, tax advisory, and other services. We’ll match you with a tax expert who knows the ins and outs of your industry and state tax rules, maximizing your annual tax savings. 

This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. 1-800Accountant assumes no liability for actions taken in reliance upon the information contained herein.