What Is a CPA? (And Why Do You Want Them to Do Your Taxes?)
Millions of Americans have straightforward tax filings, but some individual taxpayers and many business owners weave a much more complicated tax web year in and year out.
If you belong to the latter group, chances are, as you’ve sifted through receipts, invoices and financial statements, you’ve thought to yourself, “Should I hire a CPA to handle my taxes?”
Today, we’ll try to answer that question for you. We’ll start by explaining what a CPA is, what they do and when their expertise can be useful to you and your business.
What Is a CPA?
A Certified Public Accountant (CPA) is a financial professional who has met rigorous education, examination and experience requirements.
Perhaps most importantly:
- CPAs must pass the Uniform Certified Public Accountant Examination (CPA Exam), a challenging test covering auditing, taxation, financial accounting and other critical areas of expertise.
- In addition to passing the exam, CPAs must be licensed by their state. This involves meeting state-specific requirements, which typically include earning a bachelor’s degree, completing additional coursework in accounting or business, and acquiring professional work experience. These licenses hold CPAs to strict ethical and professional standards, including ongoing education to stay current with evolving tax laws and financial regulations.
That latter requirement — being licensed by the state — differs from general accountants, who typically aren’t licensed and merely have some level of education and training (bachelor’s degree or higher) in accounting.
The Role of a CPA
Certified Public Accountants have a wider skill set than you might expect. Among other things, CPAs are typically trained in …
- Tax preparation and planning: CPAs are highly knowledgeable about federal, state and local tax codes. They don’t just prepare your taxes; they also help you develop a strategic approach to minimize your tax liability across the whole year. This typically includes identifying deductions and credits and mapping out how to qualify for them, as well as advising on structuring your business in a tax-efficient way.
- Audit and assurance services: For businesses required to undergo audits, CPAs provide assurance services to verify the accuracy of financial statements. These services can increase your credibility with investors, lenders and regulatory authorities.
- Financial analysis and planning: CPAs can help businesses analyze their financial health, forecast future performance and develop strategies to achieve long-term goals. Their insights are particularly valuable during periods of growth, economic uncertainty or major transitions like mergers and acquisitions.
- Compliance and risk management: Tax laws and financial regulations are complex and regularly change. CPAs keep up to date with all applicable laws to ensure your business is in compliance, reducing the risk of costly penalties or legal issues. They can also identify potential vulnerabilities and recommend safeguards to protect your financial interests.
- Representation before the IRS: Should your business be audited or face other inquiries from the IRS, a CPA can represent you, ensuring your rights are protected and your case is handled professionally.
Why Use a CPA?
Many small business owners and individuals rely on do-it-yourself methods or tax preparation software to file their taxes. While these options might seem convenient and cost-effective, they often fall short compared to the expertise of a CPA.
For one, CPAs’ years of education and experience give them a nuanced understanding of the tax code. Tax software can only interpret the information you provide; it can’t offer strategic advice or identify unique opportunities to save money.
A similar advantage? Every business and individual’s tax situation is unique, and CPAs can offer personalized guidance that software simply can’t match.
And along with that come some pretty intuitive benefits. Hiring a CPA offers time savings compared to plugging away at tax software, and it gives you confidence that your taxes are being prepared accurately and in compliance with all regulations.
CPAs aren’t just an upgrade from tax software — they can also be a step above general accountants. They’re often more qualified to perform more complex tasks (including representing clients and conducting external audits), and they’re also tethered to ethical and professional standards in a way many general accountants aren’t.
The CPA Advantage
CPAs offer far more than basic tax preparation — they provide strategic financial guidance, ensure compliance with ever-changing laws, and help you make informed decisions that benefit your bottom line. Whether you’re a small business owner, an entrepreneur or an individual with complex financial needs, partnering with a CPA is one of the smartest investments you can make.
McManamon & Co. is a full-service firm that provides a commonsense approach to accounting, tax and business consulting services. We’re led by an experienced management team that includes several CPAs and boasts more than 100 combined years of experience. Call us at 440.892.8900 or contact us online.
Tags: accounting, McManamon, McManamon & Co., small business accounting, small business taxes, taxes | Posted in accounting, McManamon & Co., small business