CPA vs. Accountant: Which Do You Need?

Accountants and certified public accountants (CPAs) are two types of financial professionals serving both individuals and businesses. Even though their titles are often used interchangeably, they perform different services. CPAs can do everything accountants do, but accountants cannot do everything CPAs do. CPAs can also perform audits and are professionally licensed, while accountants are not. If you are deciding between working with a CPA vs. an accountant, this is what to consider.

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What Is an Accountant?

An accountant is a financial professional who compiles and analyzes financial information.

Any person who does accounting can call themselves an accountant. No certification or licensing is required, although many professionals have a college degree or at least college-level training.

Bookkeepers and accountants work hand-in-hand. While bookkeepers compile and post financial information, accountants use that information to prepare financial statements, budgets and tax returns.

Accountants also assist in analyzing the financial data, including financial ratio analysis, to determine strengths and weaknesses. Accountants develop budgets and track any variances from the line items. They can file your tax returns, but for more complex tax returns, a CPA should prepare them.

Role and Responsibilities of an Accountant

An accountant’s responsibilities vary from client to client, but they generally cover certain responsibilities:

• Use financial data to prepare financial statements.
• Reconcile accounts at the end of each accounting period.
• Ensure the accuracy of the financial data used to develop financial statements and reports.
• Perform financial analysis and use the results to prepare financial reports.
• Prepare basic tax returns and file in a timely matter.
• Ensure taxes are paid on time.
• Supervise bookkeepers who gather and post financial data.
• Evaluate financial operations to determine their efficiency and best practices.
• Strategize solutions for weaknesses found in operations.

Some accountants also offer guidance on how to cut costs, increase revenue and maximize profitability. Others may perform risk assessment, risk management and forecasting.

Accountants do not have a fiduciary responsibility, but they do have a legal responsibility to ensure that a client’s records conform to all laws and regulations. 

However, accountants cannot represent you in a tax audit before the Internal Revenue Service. They do not have the power of attestation, which empowers them to review a company’s finances and formally attest to their accuracy and reliability.

What Is a Certified Public Accountant (CPA)?

A certified public accountant (CPA) can be distinguished from an accountant because they have earned the professional designation through a combination of expanded education, experience and state licensing. 

A CPA is particularly important to an individual because they can provide advanced taxation services and financial planning services. They have attestation powers and can perform auditing functions. They can also represent you in front of the IRS if you are audited, which an accountant cannot do.

For businesses, CPAs also provide expanded tax and audit services. They help companies manage their money, taxes and investments in accordance with laws and regulations. 

In a world context, CPAs drive the financial reporting and advisory services in business and the financial industry to foster growth and success.

Roles and Responsibilities of a CPA

A CPA has several unique responsibilities:

• Attestation services
• Audit public companies
• Represent individuals and companies in front of the IRS during audits
• Prepare Securities and Exchange Commission (SEC) reports
• Prepare all types of income tax returns
• Represent clients in bankruptcies and mergers
• Help clients reduce their tax liability
• Manage client accounting operations

Qualifications for the CPA Professional Designation

The Association of International Certified Public Accountants (AICPA) sets the standards and qualifications for the CPA professional designation. Each state has a board of accountancy that sets the specific standards for the state.

There are three ways to become a CPA.

CPAs must complete 40 hours annually of continuing education requirements and conform to strict ethics requirements as stated by the AICPA. 

You must also pass the CPA exam, regardless of the pathway you choose. Following that, you sit for a four-part exam, with each part requiring four hours to complete. You must pass all four parts within an 18-month period.

There are four parts of the CPA exam:

• Attestation and auditing
• Financial accounting and reporting
• Regulation and business environment
• Concepts

Accountants, by comparison, don’t have any of these additional requirements.

When to Consider a CPA

The financial needs of many individuals and businesses become more complex over time. While an accountant may be able to handle routine bookkeeping and tax preparation, certain events may require the additional qualifications and services that a CPA can provide.

For example, these can all create tax issues that require more specialized planning. This is where a CPA can help. These can all affect a taxpayer’s overall tax situation and may require more advanced analysis.

A CPA may also be appropriate if you expect to undergo an IRS audit or need audited financial statements for lenders, investors or regulators.

The right choice depends on the complexity of your finances rather than your income alone. Some people need only routine accounting services for many years, while others reach a point where a CPA becomes worthwhile.

Which Do You Need: CPA or Accountant?

Most businesses and high-net-worth individuals benefit from working with both a CPA and an accountant, but it all depends on the complexity and scope of your financial needs. 

Accountants typically handle day-to-day financial activities. This can include:

• Recording transactions
• Reconciling accounts
• Producing internal financial reports
• Preparing basic tax returns
• Supporting budgeting processes

For small business owners or individuals with straightforward finances, an accountant may be sufficient for ongoing support and routine compliance.

A CPA is necessary when the situation requires specialized expertise, certification or legal representation. For example, only a CPA can:

• Perform financial audits
• Issue audited financial statements for public companies
• Represent clients before the IRS during an audit or tax dispute.

Individuals with complex tax issues, business income, significant investment income or estate planning concerns may also prefer working with a CPA for more advanced tax planning and compliance. 

Additionally, CPAs are subject to state licensing requirements, ethics rules and continuing education, providing the additional reassurance of professional oversight and qualifications.

If you are unsure when choosing between a CPA vs. accountant, consider the scope of the services you need.

• For routine bookkeeping, internal reporting or basic tax prep, an accountant may be sufficient. 
• If your needs include audit support, SEC reporting, multi-state or cross-border tax issues or formal financial statements for external users, a CPA is better suited. 

In many cases, using both professionals, an accountant for regular functions and a CPA for more complex tasks, can provide well-rounded financial support.

Bottom Line

Businesses and individuals alike can benefit from the services of both an accountant and CPA. However, these two financial professionals provide different services. Accountants handle your daily financial transactions and routine monthly accounting needs, while CPAs are necessary for public corporations, advanced tax issues, audits and other miscellaneous tasks. They also undergo a rigorous process to get their professional certification. Ultimately, the professional that is right for you depends on your overall tax and financial needs.

Tips for Tax Season

• A financial advisor can be hugely helpful during tax season. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel 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 to know how much you have to pay in federal taxes given your personal details, use SmartAsset’s federal income tax calculator. With only a few clicks, you can calculate your federal income tax liability.

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