Accountants vs. CPAs, that is the dilemma. When searching for a professional to prepare your taxes, the difference between an accountant and a CPA can be puzzling.
Simply put, all CPAs are accountants, but not all accountants are CPAs. Certified Public Accountants (CPAs) have to pass the CPA exam and meet certain state and education licensing requirements, whereas non-CPAs do not. But which one is right for you?
Here’s everything you need to know about the differences between an accountant and a CPA.
Do accountants need to be a CPA?
A CPA designation translates into a higher salary and more job security, but an accountant does not need to be a CPA to make a good living.
An accountant’s career opportunities are limited until they become a CPA, though. So, if this person is looking to advance their career, they should pursue a CPA designation.
For example, there are three main types of financial statements that accounts prepare: audited, reviewed, and compiled. Any accountant can prepare a compiled financial statement.
However, only a CPA can prepare an audited or reviewed financial statement. Public companies, for instance, are required to produce audited financial statements—so, CPAs are in high demand in the corporate world.
This is one of the key factors that individuals and businesses consider when choosing whether to work with a CPA or an accountant.
Tax relief and debt settlement
Accountants without a CPA certification can prepare a tax return. However, CPAs can provide additional advantages that non-CPAs can’t.
This is especially important for those who need help with tax relief or debt settlement. The best tax relief companies have tax lawyers and enrolled agents on staff, provide a money-back guarantee and charge competitive rates.
Because of the rigorous licensing and continuing education requirements, CPAs tend to be more knowledgeable about the tax laws. They are also qualified to represent you in front of the IRS, whereas non-CPAs are not.
So, a CPA can usually help eliminate tax problems more efficiently than a non-CPA accountant.
What percentage of accountants are CPAs?
Are all accountants CPAs? No. CPAs must have a formal education, pass rigorous national testing, and be approved by a state licensing board to qualify.
According to the National Association of the State Boards of Accountancy, there are over 664,000 CPAs in the United States. The Bureau of Labor Statistics says that there are 1.24 million accountants and auditors in the USA.
That means that more than half of America’s accountants are a CPA.
How much does an accountant with a CPA make?
Compensation research company, PayScale, found that the average annual salary for a CPA is $63,000, whereas the average annual salary for an accountant is about $50,000. If you include bonuses, profit sharing, and commission, the average CPA can earn up to $112,350 compared to $70,894 that the average accountant earns.
How to become a CPA
For an accountant looking to move forward in their career, this is how to become a CPA.
If the accountant hasn’t already, they must complete 150 semester hours of education. While earning a bachelor’s degree, they will receive 120 hours of education.
The remaining 30 hours if often achieved while earning a master’s degree. The American Institute of Certified Public Accountants (AICPA) recommends one of the following approaches:
- Combine an undergraduate accounting degree with a master’s degree at the same school or at a different one.
- Combine an undergraduate degree in some other discipline with a master’s in accounting or an MBA with a concentration in accounting.
- Enroll in an integrated five-year professional accounting school or program leading to a master’s degree in accounting.
The next step is to study for and pass the Uniform CPA Examination. The exam itself is administered by the AICPA. But a candidate’s eligibility to sit for the exam is determined by the person’s state board of accountancy.
The CPA Exam consists of four sections:
- Financial Accounting and Reporting.
- Business Environment and Concepts.
- Auditing and Attestation.
The test is offered during four “testing windows” that begin the first of January, April, July, and October. The window lasts approximately 10 weeks.
The total allotted time for these tests is 14 hours. About half of the candidates that take the CPA Exam do not pass.
Once they pass the CPA exam, they will receive their CPA certificate. They cannot practice as a CPA until they meet their state’s additional licensing requirements. The requirements vary by state.
The state requirements have multiple components, including:
- Social Security Number.
How to select an accountant or CPA
Just as you would research a mechanic, dentist, or contractor, you should also do your research when choosing an accountant or CPA.
Referrals from friends and family
Start by asking friends and family who they use as their accountant or CPA. This is a logical first step, but be careful because what’s right for one person may not be right for you.
Remember, Bernie Madoff received most of his clients through word-of-mouth referrals. This example is a worst-case scenario. But it reminds us to not blindly trust a friend’s recommendation.
Rather, add the recommendations from friends and family to a list of other professionals you’d like to interview.
Online review sites
Read the best and worst online reviews to look for trends. Also, compare the reviews from 6 months or a year ago against the more recent reviews. Is there a large change (up or down) in the ratings?
If you decide to interview that accountant or CPA, prepare a list of questions to find out what has changed. For example, if their reviews have gotten better, ask what changes they’ve made to improve relations with clients.
For ratings that are declining, try to sniff out any problems that cause clients to become dissatisfied with their services. Or you may choose to skip them altogether.
Accountant and CPA organizations
Search for CPA organizations in your local area. They are often self-policing and ensure that their members maintain a certain level of ethics and continuing education.
These organizations will generally not refer a specific accounting professional to you. Instead, they will share the names of the accountants or CPAs that fit the criteria that you’re looking for.
Accountants vs. CPAs: which questions to ask?
Now that you have a pool of candidates to choose from, it’s time to ask them questions to figure out which accountant or CPA is right for you.
You’ll want to ask questions about their professional qualifications, how they are compensated, their areas of focus and expertise, and availability. And if they’re preparing your taxes, you’ll want to verify that they’ll sign your tax return!
Eric Nisall, a CPA in Coral Springs, Florida, reminds readers that “you are the boss in this scenario, and the professional is working for you.” He recommends interviewing any accountant or CPA as if you are hiring them for a company that you own.
Who will you be working with?
At many accounting firms, you may meet with one person in the beginning. However, all of the work done on your account may be performed by a junior accountant. Ensure that the person you are working with is the person you think it is.
As a way to save money, you may choose to have a junior person do the work, while a senior accountant or CPA reviews the finished product.
Make sure it’s your choice and you know what you’re paying for.
To get a better understanding of their background, ask them where they went to school and what their major was. Instead of having the required training and degree, the accountant may have only taken an in-house crash course on the subject at hand.
When interviewing accountant and CPA candidates, inquire about their experience and specialties.
If you need someone to help you with your taxes, a CPA who has spent their entire career auditing large corporations may not be the right fit.
Similarly, a real estate investor with multiple rental properties would not want a CPA who focuses on preparing taxes for families with traditional W-2 paychecks.
How do they get paid?
How an accountant or a CPA gets paid matters as well. Some professionals charge by the hour, while others charge a flat fee.
Don’t believe someone if they tell you that they cannot provide an estimate for their services. They either need additional information from you to provide an accurate quote, or they may be hiding something.
How the company and the person with which you’re working gets paid can be two different things. Mr. Nisall says, “There are a lot of companies that pay ’employee’ based on volume. You should never have to feel like your return is being rushed just to meet some quote or to reach a bonus level.”
Who will sign your return?
This question is critical. The person who signs your return takes the responsibility for the information being reported to the IRS and the state. If someone won’t sign your tax return, you have to question why.
Accountants vs. CPAs: which one is right for you?
For everyday accounting tasks, an accountant is all that you need. However, if your situation is more complex, you may need a CPA. Again, this is especially true if you need help with tax relief or debt settlement.
But as with any profession, just because someone holds a license designation, it doesn’t mean they are the best qualified to handle every situation. This is why you must interview any potential accountants or CPAs before working with one.
You’ll want to fully understand their experience, background, and focus to ensure they are a right fit. Remember, there are over 600,000 CPAs in the United States. You will find one that is right for you.