Is a CPA Better than a Tax Preparer?

CPA vs Tax Preparer

Filing taxes can be a difficult task. Many clients wonder whether using a Certified Public Accountant (CPA) is more beneficial than using a standard tax preparer. The answer largely lies within the financial factors involved and the complexity of the tax situation. This can also determine the level of expertise needed.

What is a CPA?

A CPA is a licensed accounting professional. They must also pass the Uniform CPA Exam, which is a requirement for state education, and must complete continuing education. They have the ability to provide a huge range of services outside of tax filing including:

  • Tax planning and strategy

  • Financial statement preparation

  • Audit representation

  • Business consulting

Because of all the training and tests needed for a CPA, they must adhere to very high ethical and professional standards.

What is a Tax Preparer?

A tax preparer is someone who is authorized to prepare and file tax returns. They can have professional training or experience, but are not legally required to be a CPA. They are able to manage simple individual returns which include W-2 income and basic deductions, but cannot provide the range of services that a tax CPA can provide.

Some tax preparers are also Enrolled Agents (EAs). EAs are able to represent clients before the IRS, however not every tax preparer holds this credential.

When a CPA is a Better Option

You could benefit more from a CPA in these situations:

  • Multiple income streams (business income, investments, rental properties)

  • High net worth

  • Self-employment or business ownership

  • Potential IRS audits or tax disputes

  • Need for strategic tax planning or estate planning

A CPA can help guide you through proactive tax compliance and tax reduction strategies to minimize tax exposure while adhering to the guidelines from the IRS and state authorities. They can also help you set long-term plans instead of just tax filing for the current year.

When a Tax Preparer is Enough

A tax preparer is often enough in the following situations:

  • Employment income from one W-2

  • No self-employment or side business

  • Claimed the standard deduction with very few credits

A tax preparer can usually help you for less than a CPA, and is more suited for the situations above as they can process those returns faster.

Do you need expert tax help? A CPA can help you with tax accuracy, tax deductions, and most importantly tax planning to avoid future tax issues.

George Dimov