When a business owner in the Southern California area is met with the decision of whether to hire a local CPA, it can be tempting to go with the less expensive option. The terms accountant and CPA are often used interchangeably, but even though their duties are similar, their roles within a company vary greatly. While they can perform all the duties of an accountant, an accountant cannot perform all the duties of a CPA. The profession held to a particularly high set of standards due to the California laws governing the certification process.
Realizing that there are many choices for good firms in the area, here are some things you should look for when hiring one:
Before addressing the differences between the roles of accountants in the Southern California area, let us first look at the differences between the educational requirements of the two.
An accountant does not need to be licensed. They need only hold an accounting degree. While some hold a bachelors degree, many trade schools or vocational schools offer associate degrees in accounting that can be obtained in a year or two.
CPA stands for certified public accountant. The keyword in this title is “certified,” meaning they are subjected to a strict licensing exam before they are certified, just as in the case of doctors and lawyers. While the requirements for them vary from state to state, in the state of California, one must hold a bachelor’s degree and undergo two years of general accounting experience under the supervision of a licensed accountant before they can even be eligible to take the certification exam. Once the certification process is complete, the State of California then requires forty hours of continuing education each year to stay abreast of the most recent laws and technologies available in order to retain the license. Once certified, they are then held to strict ethical standards set for by the American Institute of Certified Public Accountants.
When it comes to tax time, only a certified public accountant is allowed to prepare and sign tax returns. While they can gather receipts, organize them, and add them up, only a tax professional may fill the role of tax preparer and actually sign the tax return. Having a tax return prepared and signed by a tax professional lends the tax return an element of integrity in the eyes of the IRS, reducing the chance of being audited down the road. If an audit does occur, they can stand with the business owner as a representative.
Are They Worth The Money?
Although hiring a a tax professional is more expensive, the services they provide will typically pay for itself by way of money saved through utilization of their expertise, particularly at tax time. Not only can they prepare and sign a tax return, but also engage in tax planning throughout the year, advising business owners of tax loopholes for which the company may be eligible or, if not, advising them on how the company may become eligible. Aside from tax time, their consultation services regarding investment strategies, cash flow analysis, and other complex financial topics also means a larger bottom line for the company.
Some business owners may feel they are knowledgeable enough to handle their own book and tax preparation work and, subsequently, need only hire an accountant. A word of caution is in order in answer to this way of thinking. Financial health is not just about entering numbers into a computer and generating reports. It is about monitoring, observing, and projecting into the future. It is about understanding cash flow, managing assets, diversifying investments, and seeking creative financial solutions to complex tax problems. This kind of in depth understanding of finances only comes through rigorous training and continuing education. The typical business owner does not have time to pour over reports and analyze them to such a degree as an outside professional can. Any business owner prepared to sail the high seas of the business world without qualified, expert help to navigate troubled waters is potentially inviting disaster.
Learning to Utilize Their Services
Many business owners are not well-versed on all the various functions their accounting professional can perform and, subsequently, they are often underutilized. While tax preparation is their specialty, it is important to understand all the various services offered by one and to draw on their expertise. When in doubt, a business owner should ask for help on exactly what services they offer and what advice they can give for the financial future of the company.
Call Us Today!
When you need the expertise of a professional tax preparer, give us a call at 818-242-4888. We serve the Burbank, Pasadena, and Glendale areas.
*Note: We are not CPAs – we are enrolled agents