Burcu Bree Manay, Managing Partner & CEO at Manay CPA.
Whether you’re an individual taxpayer or a business owner, understanding tax laws, identifying deductions and ensuring compliance can be overwhelming. Many taxpayers face the same question: “Should I consult a tax professional?” When in doubt, a Certified Public Accountant (CPA) can be an invaluable resource.
Understanding The Role Of A CPA
A CPA is a licensed accounting professional with expert-level knowledge in taxation, accounting and financial consulting. CPAs provide a wide range of services, including preparing tax returns, conducting audits, managing bookkeeping systems and examining financial records for compliance. With their extensive, up-to-date knowledge of the accounting industry, CPAs can make best-practice recommendations that strategically improve financial situations for individuals and businesses alike.
Why Hire A CPA
If you have more complex financial transactions, own a business, have made large investments or have recently experienced a major life change, a CPA or CPA firm can provide expertise and peace of mind. CPAs offer educated eyes that can identify key financial strategies and other opportunities to save you time and money.
Reduced Tax Liability
CPAs can help businesses file tax returns as efficiently as possible by applying specific tax deductions and tax credits to situations that tax preparation software might miss. They can devise strategies that reduce your annual tax liabilities while remaining in full compliance with the law.
IRS Representation
Most CPAs are well-versed with the official tax code and dense financial language of the Internal Revenue Service (IRS). In the event that the IRS contacts you or your business, CPAs can help you make sense of the letters, notices and other correspondence and represent you as accurately as possible.
Proactive Financial Planning
CPAs have the ability to examine your financial documents and tax records for accuracy, efficiency and legal compliance. In doing so, they can also help you make more responsible financial decisions that save you money and encourage long-term financial success.
CPA, Tax Preparer Or Accountant: Know The Difference
All CPAs are accountants, but not all accountants are licensed CPAs. CPAs must maintain a passing grade on the notoriously difficult CPA exam administered by the American Institute of Certified Public Accountants (AICPA), and they also hold state-level accounting licensure in their practicing state. They must also fulfill specific Continuing Professional Education requirements to keep their license.
Both CPAs and tax preparers are equipped to prepare tax returns, but a CPA’s professional expertise and capabilities extend far beyond tax preparation. Some CPAs may even elect not to prepare tax returns and instead practice other specialties in financial planning, such as auditing.
Questions To Ask Your CPA
CPAs may be tax experts on paper, but it is important to choose a tax professional who can fully serve your tax needs. Consider asking the following questions before you hire a CPA:
What is your experience with tax situations similar to mine?
This question helps you determine if the CPA possesses the right knowledge and skills for your specific financial scenario. If they seem unfamiliar or uncertain about how to effectively handle your situation, consider it a red flag.
What are your fees?
If you have a strict budget for how much you are willing to invest in tax preparation services, always ask this question before hiring any CPA.
What is your policy for responding to the IRS and other government correspondence?
In the event that the IRS issues letters or notices to taxpayers, you want to be sure that this CPA can be your representation when communicating with the IRS.
How do you stay up to date on tax laws and other changes in the industry that may affect my tax situation?
For most CPAs, this is an essential part of their job in order to stay relevant in their industry. Any change in tax laws or other parts of the financial landscape could positively or negatively affect your overall tax liability or, in other words, cost you money.
Choose The Right Tax Professional
Always take the time to do your research, ask the right questions and choose a CPA or tax professional that you feel comfortable with and that can best serve your tax needs. After all, every tax situation is unique, and the decision to hire a CPA should be based on your specific needs and circumstances.
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