Does your small business need a CPA?

​You might be thinking that since you are running a small business, you will not need a CPA for managing your accounts but that’s not true. The importance of a CPA doesn’t depend on the size or type of business because every business needs a CPA, regardless of their size. Many business owners think that an accountant will be enough to handle their financial operation but if you really wish to streamline your accounting operation then opting for CP over an accountant will always be a good decision.

​The difference between accountant and CPA

Accountant is just a general term which is used for referring to a financial or tax professional who follows certain rules and regulation that also includes the Generally Accepted Accounting Principle. The GAAP is a set of rules which has been set by the Financial Accounting Standard Board.  While CPAs are special accountants who have passed the licensing examination in your state. This means that all CPAs are accountants but all accountants are not CPAs.
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There is a large group of small business that uses the service of an accountant in order to get done with their accounting operation and there is no doubt that there are some accountants who can fulfill the accounting needs of small business but that is applicable only in the case of a very small business. So, let’s see why a CPA is a better option than an accountant for a small business.

​A licensed expert

​A CPA is an accounting expert who is licensed by the state and in order to maintain his license, he needs to be updated with the latest tax and accounting law otherwise his license will be canceled while accountant are not licensed and they are self-made accounting service providers. The exam which is necessary to be passed to become a CPA is very tough and only a person with good knowledge of accounting and tax can pass it. In order to maintain their license, the CPAs must comply with continuing education requirement. So by choosing a CPA, you can be sure about an expert accounting service which comes intact with the latest tax and accounting knowledge. 

An enrolled preparer

It is true that all the CPAs are not specialized in small business taxes but there is a large group of CPAs that have a better knowledge of tax laws than any other accountant. The tax law is a very big part of the exams which a person needs to pass in order to become a certified CPA and in order to be updated with the tax laws, many CPAs take on tax course. You should also know that an accountant is eligible to file your taxes but the label of accountant doesn’t give assurance of certification and it also restricts the accountant from representing your before the IRS as they have labeled accountants as unenrolled preparers who can’t represent their clients in front of IRS.
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All tax preparers must have a preparer tax identification number and even after the PTIN, the IRS categorizes preparers into enrolled agents, CPAs, attorney, and unenrolled preparers. The accountants are put in the last category by the IRS.

Detailed financial analysis

​When it comes to financial analysis then the bookkeepers routine task of record input and the accountants analyze these inputs prepare the financial report. That’s why the financial analysis done by an accountant is very limited and you can’t get in-depth knowledge of your financial status. While a CPA does a more in-depth analysis of your financial statement and thus you get an advisor on financial and tax matters. But you should also know that just a designation of CPA doesn’t mean that the person will give you better financial analysis, but it will surely increase the chances of an in-depth financial report. 

 Helpful in IRS audit

One of the biggest reasons for small businesses to prefer CPA over an accountant is that a CPA is the only eligible accountant who is legally capable to represent you before IRS in an audit while an accountant is not allowed to represent you in such kind of situation. All the accountants who haven’t passed the CPA exam can represent their client in a very limited manner. So, if you are paying money to a professional for preparing your taxes then you should make sure that he is eligible enough to represent you in case of an audit in front of the IRS.
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So, all these points make it clear that if you are choosing accountant for your small business then you will become very limited in both financial and tax operation while on the other side choosing a CPA will give you added advantages in your business.