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Do I Need a CPA for My Small Business?

do i need a cpa for my small business

As a business owner, you might find yourself asking, “Do I need a CPA for my small business?” This is because It’s often not required to hire a certified public accountant (CPA) for your small business. But in many cases, it’s a good idea because tax time can be a headache without the right help. Their specialized tax knowledge can guide you through the complicated world of taxes and actually save your business some money. Some CPAs also work as financial advisors and can help you create an entire financial plan in an effort to reach all of your personal financial goals. 

What Is a CPA?

A certified public accountant has completed extensive educational and state licensing requirements in the areas of accounting, tax preparation and other financial matters.  The professionals have passed a CPA exam, which qualifies them to provide specialized tax advice and lets potential clients know that they have the necessary qualifications to help them with certain financial needs.

With their unique skill set, a CPA can help you plan out an efficient tax strategy for your business. Companies turn to CPAs to help them manage money, taxes and investments in an efficient way that follows the rules of the tax code. If your business is audited by the IRS, a CPA can represent you throughout the process.

Do You Need a CPA for Your Small Business?

CPAs have extensive knowledge of both accounting and taxes, and they can help your business in a variety of ways. From making sure that your business keeps accurate books to help your business get financed or even helping you save money come tax time, a CPA can put your business in a better financial position. A few services a CPA can provide include:

  • Help your business reduce tax liabilities: You don’t want to pay more in taxes than you need to. A CPA can provide advice for efficient tax strategies.
  • Keep tax-related records: You can hire a CPA to manage your tax-related recordkeeping all year.
  • File taxes: A CPA is qualified to handle all necessary tax filings. They can file everything from regular tax returns to extension requests.
  • Provide business advice: An experienced CPA has seen the operations of many businesses. If you have questions about budgets or financial decisions, they will be able to help.
  • Handle payroll taxes: If you don’t want to use payroll software, a CPA can handle the paperwork that comes along with payroll taxes.
  • Conduct thorough audits: A CPA can audit public companies. Additionally, a CPA can represent an individual or company if facing an audit from the IRS.

If your business could benefit from any of the services above, consider hiring a CPA. Although not necessarily required for your small business, the advice provided by a qualified CPA could optimize your tax strategy and change your business for the better.

On the other hand, the cost for a CPA’s expertise may outweigh its value. The more precisely you understand your firm’s accounting, record-keeping and tax-filing challenges, the better you will be able to tell whether you need all that a CPA brings to the task.

CPA vs. Accountant

do i need a cpa for my small business

A CPA is considered the highest credential that an accountant can earn in the United States. Accountants who do not carry the CPA designation can also provide helpful services to your small business. An accountant can compile and analyze financial information for a company. But an accountant doesn’t have the qualifications required to be considered a CPA.

A qualified accountant can help your small business handle some tasks, including:

  • Prepare financial statements: An accountant has the knowledge to prepare financial statements and confirm the accuracy of the underlying data.
  • Evaluate financial operations: Based on the information they collect, an accountant can determine the efficiency of the financial operations of a company.
  • Ensure taxes are paid on time: Although an accountant cannot represent you in front of the IRS if there’s an audit, they can ensure that the business is paying taxes on time.

The skills of an accountant can come in handy if your business needs help monitoring the books and preparing financial statements. Their advice could help you cut costs and manage risks.

CPA vs. Enrolled Agent

An enrolled agent (EA) is a tax professional who has passed a qualifying exam and whom the federal government recognizes as tax specialists. Typical EA responsibilities include representing business or individual clients in tax appeals and tax collections. Additionally, EAs can also provide tax advice, tax return filing and more.

Unlike a CPA, which provides broad accounting services in addition to tax services, an EA often focuses on providing tax services to individuals and businesses. As a business owner, an EA can provide tax advice and file your taxes. Additionally, an EA can represent you if the IRS audits you.

Differences Between CPA & Enrolled Agent

Professional FocusBroad accounting, tax and financial services for businessesTaxes for businesses and individuals
Qualifications for PracticeState education requirements (usually 150 hours of undergrad); pass CPA examFive years IRS experience; pass the EA exam
Hourly rateAverage of $30 to $500, depending on experience, rank within firm, whether CPA is a firm ownerAverage of $12 to $55

If you have a solid grasp of tax planning on a broad scale for your business then an enrolled agent is a good choice. They’ll help with the nitty gritty details of tax filing. But if you are looking for more general advice about your business and related taxes, you’ll find more value when working with a CPA.

Bottom Line

do i need a cpa for my small business

Most businesses can benefit from the help of a CPA. Although their services are only required in certain situations, like an audit, their knowledge can create an efficient tax strategy for your business. Having the right CPA, who is also a financial advisor, can also benefit you personally by managing your personal finances and understanding how your business fits into your overall financial goals.

Tips on Small Business Operations

  • Some CPAs also work as financial advisors. The combination of skills can be the perfect mix for managing your personal and business finances. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
  • If you want help mapping out an efficient tax strategy for your business then consider working with a CPA. With their assistance, you can optimize your taxes.

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