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Whether you are looking to build a career or hire professionals for your finance and accounting-related problems, you should have complete knowledge of the difference between a CPA & a Tax Preparer to make the right decision. Tax-related solutions such as preparing and filing for tax returns can be done by a Certified Public Accountant (CPA) and a Tax Preparer, as both are authorized to do that.
But do you know where they differ? Do you know who is authorized to sign the papers? Well, if you don’t, that’s what we’re here to tell you. In this article on CPA vs. Tax Preparer, we will explore the prime differences between the two professions and the areas of their expertise and authority. Moreover, we will discuss their scope and responsibility so that you can decide how to help solve your financial needs or make a successful career. Let’s dive right into it!
The Certified Public Accountant, or the US CPA, is an internationally recognized certification in the field of Accounting and Finance validating the credentials of the certificate holders as adept in the skills of the relevant fields of expertise. The US CPA is a certification conferred to individuals upon clearing the certification exam- the Uniform CPA exam.
The official accounting body governing the US CPA exam is the American Institute of Certified Public Accountants, the AICPA, and the National Association of State Boards of Accountancy (NASBA). The AICPA works in collaboration with 55 US State Boards of Accountancies (BOA) and the NASBA for the Uniform CPA exam. Knowing about the governing accounting body is an important aspect of the CPA vs. Tax Preparer comparison as you would be certain of the credibility of the professional having certain knowledge of the work he is hired for.
Candidates clearing the Uniform CPA exam don’t start working right away. To become a licensed CPA member, they must apply for the CPA License, which the AICPA also issues in association with the 55 BOAs. However, every state has different educational and professional experience criteria, which must be fulfilled to be eligible for CPA licensure. Therefore, whichever state you wish to work in, you need to submit an application for the CPA License to register with the respective state. As you shall see ahead, it is an important aspect of the CPA vs. Tax Preparer comparison.
As stated above, before applying for the CPA License, you must fulfil certain eligibility prerequisites as specified by the respective state boards for licensure application. The criteria requirements for the CPA License application are as follows:
To continue your career as a licensed CPA professional, you need to comply with the Continuing Professional Education (CPE) requirements. This is an important aspect of the CPA vs. Tax Preparer comparison as it marks the quality maintenance aspect of the professional. It is a necessary step that enables licensed CPAs to continue their career with excellence and offer quality services throughout.
In the CPE framework, licensed CPAs are required to be in a continuous learning program in the relevant subjects and earn credits, which may vary according to the respective state boards. The CPE framework is offered by the AICPA and the NASBA for the development, awarding, and assessment of CPAs in the CPE program.
The area of specialization is the most significant difference in the comparison between the US CPA vs. Tax Preparer. While a Tax Preparer specializes in every aspect related to taxation, a licensed CPA has expertise in more than just taxes. Additionally, the CPA license adds more credibility to the tax reports prepared by CPA professionals. Tax Preparer is specialized in working in taxation, while a licensed CPA has an expanded field of work speciality including some of the following areas of speciality:
Being highly skilled in some of the most lucrative career fields in Accounting and Finance, licensed CPAs are eligible for many job roles in the related fields. This is an important comparison of CPA vs. Tax Preparer as a Tax Preparer can only fill in taxation-related job roles. Whereas licensed CPAs can fill any job role in finance and accounting, ranging from a consultant to a financial planner or even a Chief Financial Officer.
Licensed CPAs are hired by many of the top accounting firms, multinational corporations, and governmental and nonprofit organizations due to their extensive knowledge and skills in the domain of Finance and Accounting. Due to the diverse nature of the areas of their expertise, licensed CPA professionals are in high demand across several industries around the globe. It makes for an excellent career choice due to the variety of job roles available, offering excellent career growth. In the comparison of CPA vs. Tax Preparer, this is another aspect that stands out. Here is the list of some Job positions for CPA USA
Due to their multifaceted expertise, licensed CPA professionals are in high demand in several countries. Their depth of knowledge of taxation can help you with more than just filing taxes and returns. They are adept at financial and tax planning as well.
As professionals in finance and accounting, CPAs can also provide solutions to your accounting-related needs and valuable insights into your business management prospects.
Another aspect of the CPA vs. Tax Preparer is standing with the Internal Revenue Service (IRS). Licensed CPAs possess unlimited standing with the IRS, but a Tax Preparer has little to no representation rights under the IRS. It leaves little room for Tax Preparers to represent themselves on aspects related to auditing, appealing, paying, or collecting related issues, but a licensed CPA can. Additionally, with a responsible governing body overlooking the work of a CPA, there is little chance of fraud.
A Tax Preparer is more of a generalized term for any professional who is associated with preparing and filing taxes and tax returns on behalf of their clients. A Tax Preparer generally does not hold a license but has the relevant expertise to provide services for tax-related issues.
There is no such imposition on a Tax Preparer to practice in terms of education, experience, or licensure. There is no standard regulating test held for becoming a Tax Preparer. However, just like a CPA, a Tax Preparer should hold an IRS Preparer Tax Identification Number (PTIN) to have the authorization to prepare taxes. This PTIN is liable to be renewed every year.
As stated, a Tax Preparer has almost no representation rights before the IRS regarding any taxation or auditing-related issues. However, Tax Preparers can acquire some representation rights if they enrol in the IRS Annual Filing Season Program (AFSP), which helps them to enhance their knowledge and prepares them for a specific financial year. The AFSP is an optional program that benefits them by enlisting their names in the IRS public directory of Tax Preparers.
Under the AFSP, a Tax Preparer has to:
Upon fulfilling all the criteria requirements, the individual received a Record of Completion, which entitles them to represent before the IRS for tax return-related issues. However, such candidates are not eligible for representation in case of collection or appeal.
A Tax Preparer can be hired for simple tax-related matters by individuals as well as businesses and organizations. Tax Preparers are preferred over CPAs when only tax-related matters need attention and not any accounting issues, especially when there is no need for any kind of representation before the IRS as it is an uncomplicated procedure for filing taxes and returns.
The major differences between the CPA vs. Tax Preparer lie in some of the following aspects:
| Particulars | CPA | Tax Preparer |
| Accounting Body | AICPA, NASBA | None |
| Professional Requirements | Clearing the US CPA exam, acquiring 120-150 credits, passing Professional Ethics Module (varies from state to state) | Varies from state to state |
| Responsibilities | Assessment and preparation of reports, forecasting budget and revenue, evaluating profit margins, filing taxes and returns, and organizing financial records. | Evaluation and calculation of taxes, filing taxes, reviewing financial details |
| Areas of Speciality | Accounting, auditing, taxation, forensics, financial and business planning, financial management, etc. | Taxation |
| Continuing Professional Education | 40 hours per year | 18 hours per year as part of AFSP (optional) |
| Standing with IRS | Unlimited standing with IRS | Limited standing after AFSPNo standing rights without AFSP |
| Average Annual Salary | $77,000 | $33,000 |
A CPA is a licensed professional and can represent the IRS, while a Tax Preparer has no license and, therefore, no authority to represent the IRS. Furthermore, a CPA has a wider job market to search from, but a Tax Preparer has limited opportunities.
A CPA specializes in many aspects of finance and accounting, making them suitable for addressing queries related to accounting, auditing, taxation, forensics, etc. Additionally, being licensed individuals under a Regulatory body, there is almost no chance of fraud.
If your tax situation is complicated & needs standing before the IRS or has been audited by the IRS, you need your taxes to be reviewed and prepared by a CPA.
If you have to address simple tax-related matters that do not need representation before the IRS, you should opt for a Tax Preparer as it will cost you less than a CPA. However, if there are complicated issues that need representation before the IRS, you should take help from a CPA.
Now that you are aware of the differences between the CPA and the Tax Preparer, we will be able to make an informed decision about which Career to pursue or whom to hire to solve your finance-related problems. If taxation is your niche, pursuing the US CPA certification will give you more credibility.
If you are interested in pursuing a CPA as a career, you must clear the Uniform CPA exam. To help you in your efforts, NorthStar Academy offers a specialized CPA certification course for effective preparation where more than 15,000 students have benefitted from the assistance of expert guides like M. Irfat Sir.
Join NSA today and become Career ready for a prosperous career as a professional Certified Public Accountant.tel:+918147470707
