Work Effectively with Your Accountant or Tax Preparer

You wouldn’t use a hammer to tighten a nut, would you? I also hope you don’t use a screwdriver to brush your teeth. For every task there are several different tools that we could use. Some are better than others, but there is usually one that stands out as the best solution. The best solution is achieved by maximum efficiency, best fit, ease of use, cost, or even knowledge.

The same concept applies to taxes.

I almost cringe whenever I ask someone, “Who does your taxes?” and they respond, “My buddy who is a CPA takes care of them for me. He’s been doing them for years.” While I am glad that this individual has been getting their taxes taken care of, they may be using the wrong tool. Don’t get me wrong, a CPA CAN do taxes and probably does them better than most people. But this is like me saying I can put a screw into a piece of wood with a hammer. It would work, but there is a better tool out there.

CPAs generally have a good education and background in accounting and have passed an exam that certifies them to practice certain skills such as performing audits, preparing financial statements for businesses, understanding corporate governance structures, and dealing with various types of business regulation. This allows CPAs to prepare taxes, but their specialties usually lie with businesses. Tax preparers and especially Enrolled Agents, commonly referred to as EAs, are tax specialists. They are required to have a mastery of the tax code and be able to work closely with the clients they represent. While they may not have the same broad educational background as a CPA, everything they do is geared towards tax law. EAs are required to pass a three-part exam through the IRS that covers representation as well as individual and business tax returns. Because tax laws are ever changing, Enrolled Agents must be detail-oriented and ensure their knowledge is up to date.

Accountant Job Duties:

• Prepares asset, liability, and capital account entries by compiling and analyzing account information.
• Documents financial transactions by entering account information.
• Summarizes current financial status by collecting information; preparing balance sheet, profit and loss statement, and other reports.
• Substantiates financial transactions by auditing documents.
• Maintains accounting controls by preparing and recommending policies and procedures.
• Reconciles financial discrepancies by collecting and analyzing account information.
• Prepares payments by verifying documentation and requesting disbursements.
• Complies with federal, state, and local financial legal requirements by studying existing and new legislation, enforcing adherence to requirements, and advising management on needed actions.
• Prepares special financial reports by collecting, analyzing, and summarizing account information and trends.

EA/Tax Professional Job Duties:

• Help individuals and prepare personal income tax returns.
• Work with small businesses in specific industries.
• Organize businesses with a certain tax structure, such as partnerships or LLCs.
• Work with corporations to prepare corporate tax returns.
• Help estates and trusts, dealing with their unique tax obligations.
• Preparing documents and filing them with the IRS.
• Communicating with the IRS on behalf of a taxpayer about the taxpayer’s rights, privileges, or liabilities under the tax code.
• Attending meetings, conferences, or hearings with the IRS on the taxpayer’s behalf.
• Advising the taxpayer and acting on the taxpayer’s behalf.

I am not inferring CPAs are bad. There is just a right tool for every job. CPAs are a tool for certain functions. Tax Professionals have another function. There is a common misconception that being a CPA makes you an income tax expert, or if you present yourself as a tax professional that you’re a CPA. This doesn’t give CPAs the credit they deserve in their certification and what they are truly experts in. It also falsely assumes that they have an expert understanding of the income tax code. Many CPAs seek our help in preparing their taxes because we are experts in income tax law. Tell us about the problem you are having, and we can help you better understand which is right for you.

Clark Boyd
General Manager