CPA Sheryl Schuff, CPA and business owner, recently talked about the process of selecting a CPA. Here is a summary of her comments, which were presented in two parts.
CPAs vs. Tax Preparers
Business owners should understand that not all tax preparers are CPAs and not all CPAs do tax prep work. While you don’t necessarily need to hire a CPA to do your taxes (there are many competent non-CPA professional tax preparers), you do need to consider what other kinds of services you might need, like choosing accounting software, setting it up and getting trained, data entry tasks, and review of records for tax evaluation.
In some ways it’s like choosing a doctor. Some physicians are general practitioners and some are specialists. Sometimes you’re fine with your family doc, but sometimes you prefer one who concentrates on the particular area you’re having trouble with.
Tax practitioners can be generalists or specialists and so can CPAs. Just be careful if any of them tells you they know everything there is to know about taxes. That’s a huge red flag. As you well know, the Internal Revenue Code is a massive piece of legislation and it would be literally impossible for anyone to understand it all.
Licensing Requirements
The licensing requirements for CPAs vary from state to state as do the minimum and ongoing educational requirements. Some states don’t have any laws at all regulating who can call themselves a tax preparer. In those states, anyone can offer to prepare taxes for another person and charge for their services. There is a uniform exam that all U.S. CPAs have to pass, but the educational requirements to get (and stay) licensed are decided by the individual states. And CPAs may not be required to keep up to date on tax laws every year, so being a CPA doesn't guarantee that the individual knows any more about taxes than when he or she originally passed the CPA exam.
Enrolled Agents
An enrolled agent is a person who has either passed a standardized test that covers all parts of the tax code or who has at least 5 years’ experience working for the IRS in a qualifying position. EAs are required to have 72 hours of continuing education every 3 years with a minimum of 16 hours every year. Like CPAs, they have to take an ethics course. Unlike CPAs (who can take accounting, management, technology, and personal development courses), EAs have to take all their courses in the area of Federal taxation.
While EA's must focus on tax information, a CPA who voluntarily keeps updated on tax issues might be more competent than an EA.
Selecting a CPA for Business Taxes
First, decide what kind of services you need. You may determine that you want someone to help with tax planning, to find someone who can help figure out the best ways for you to structure employee benefit plans and retirement programs to get the maximum tax savings.
Back to Select and Work With Business Advisors
Back to Getting Help with Tax Preparation
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