What is a CPA (Certified Public Accountant)?
CPAs are highly-trained professionals who can provide a variety of financial services – including tax return preparation and tax planning. Unlike other accountants, CPAs are licensed by their state’s board of accountancy only after satisfying rigorous educational, examination, experience, and ethical requirements. If you want to hire a CPA, there are also advantages to working with a local CPA near your home or business.
Key Takeaways
- A CPA is an accounting professional licensed by their state board of accountancy to offer accounting services to the general public.
- CPAs must satisfy certain education and training requirements to obtain a license, such as completing 150 semester hours of college coursework, passing a rigorous four-part exam, and working under the supervision of a licensed CPA. Licensed CPAs must also take continuing education classes.
- Some CPAs specialize in taxes, which typically involves preparing tax returns and providing tax planning services. CPAs are also authorized to represent clients before the IRS for audits, collections, appeals, and other issues with the tax agency.
- Local CPAs can have certain advantages over CPAs that are far from your home or business, including familiarity with local laws and regulations, experience working with local agencies, and potential access to other financial professionals in the area.
CPAs are accounting professionals
A certified public accountant, or CPA for short, is an accounting professional licensed and credentialed by a state to offer accounting services, including tax preparation, to the general public. According to the National Association of State Boards of Accountancy, there are more than 670,000 actively licensed CPAs in the U.S., so it shouldn’t be too difficult to find a CPA nearby.
Some CPAs are employed by corporations and other businesses to do internal accounting work for the company. However, many of them have their own business or work for public accounting firms, which allows them to offer their services to a wide variety of individuals, businesses, and nonprofit organizations.
What does a CPA do?
A CPA can provide a variety of accounting services. One essential task for most CPAs is to prepare, maintain, and/or inspect financial records to ensure that the information they represent is accurate and complies with relevant laws and regulations. This can include:
- preparing financial statements
- organizing financial records
- preparing tax returns
- providing financial and tax forecasts
- preparing documents required by the Securities and Exchange Commission (SEC)
- providing auditing and review services
In addition, since accountants can usually develop a deep understanding of your finances, they can often help improve your financial performance, set financial goals, and create a plan to achieve them.
Education and training
CPAs are licensed and regulated at the state level through the state’s board of accountancy. However, before granting a CPA license, states require candidates to:
- complete 150 semester hours of college coursework
- pass a rigorous, four-part exam administered by the American Institute of Certified Public Accountants (AICPA)
- gain work experience under the supervision of a licensed CPA
Once licensed, CPAs have to take continuing education classes to stay up to date on the latest rules, laws, regulations.
Ethical standards
In addition to the rigorous training, exam, and experience requirements, most state boards also require CPA candidates to pass an ethics exam. The majority of states that require an ethics exam use the AICPA’s professional ethics test, but CPA candidates in some states have to take a different test.
Continuing education courses on ethics are typically required after a CPA is licensed, too.
Some states also require CPA candidates to go through a background check, including a check of criminal records, before granting a license. Prospective employers might also require a background check before hiring a CPA.
CPA specialties
CPAs can specialize in a number of areas. Some of these include:
- Tax preparation – providing assistance to individuals, small businesses, corporations, and other organizations filing their tax returns, including returns for income, payroll, estate, excise, and sales taxes.
- Forensic accounting – investigating financial crimes, such as embezzlement, securities fraud, and other criminal financial activities.
- Management accounting – analyzing the financial information of the organizations for which they work.
- Government accounting – maintaining and examining the records of public agencies.
- Information technology accounting – reviewing financial controls for an organization's computing systems.
Tax CPAs
Some CPAs concentrate on taxes. Their work typically focuses on preparing tax returns and providing tax planning advice.
A tax CPA can also help clients take advantage of potential tax benefits. Their experience and knowledge of the tax code allows them to identify tax credits and deductions that can lower your tax bill or increase your tax refund. For example, a tax CPA can review your mortgage tax deductions, charitable deductions, and child expenses to make sure you’re maximizing your tax savings.
In addition, tax CPAs often provide expert advice regarding rental property, investment income, business expenses, and industry-specific deductions that non-CPA tax preparers might miss. They can also help with the tax aspects of estate and general financial planning.
CPAs are also authorized to represent clients before the IRS to help deal with all matters with the tax agency, including audits, collections, and appeals.
TurboTax Tip:
It’s important to regularly update your tax CPA about any significant changes in your financial situation or business activities. That way, your CPA can provide the best advice and optimize your tax savings. It can also prevent last-minute surprises during tax season and help you stay ahead of tax deadlines and other filing requirements.
CPA vs. accountant
All CPAs are accountants, but not all accountants are CPAs. Someone can study accounting and work in the field, but they can’t use the CPA designation unless they’ve satisfied the educational, exam, experience, and ethical requirements described earlier for obtaining and keeping a CPA license.
Because of their higher-level of training and ethical standards, there are a few things that CPAs can handle that other accountants can’t do, such as:
- represent clients before the IRS (although accountants with other credentials, such as an enrolled agent, can also represent clients before the tax agency)
- prepare and sign financial statements for publicly traded companies that are required by the SEC
- conduct external audits, including audits of public companies
- issue attestation reports to validate the reliability of a company's financial statement, data, or other information
Their education and training often make CPAs a better choice to handle other tasks that accountants can also do, such as preparing tax returns and offering tax planning advice.
Should I hire a CPA near me?
One common question for people looking for a CPA to prepare their taxes is: “Should I hire a CPA near me?” With all the technological advances available today, it’s relatively easy to work with a faraway CPA. You can talk online and send documents electronically without ever having to leave your home. However, hiring a local CPA has certain advantages.
One important benefit of working with a CPA near you is that they will be familiar with all local tax laws and regulations for your area, which can vary greatly from one place to another. As with federal tax law, there are penalties for failing to comply with local tax laws – and you don’t want to be hit with those penalties because your CPA wasn’t up-to-speed on them.
A local CPA will likely have experience working with the state and local tax agencies where you live, too. That can be a great advantage if you need to contact one of those agencies for guidance because you have an unusual situation or a problem arises.
If you’re more comfortable discussing personal financial information in person, you’ll want to find a CPA nearby so you can schedule face-to-face meetings. That will cut out long travel times for consultations. It’s also easier to develop a personal relationship with your CPA if you can look each other in the eye.
In addition, a CPA near you will usually know other professionals in the area that can help with other financial services. For instance, if you need a lawyer or financial planner, a local CPA can probably refer you to a reliable person or firm near your home.
If you’re running a business, a local CPA will likely have a good feel for your area’s business environment as well (most CPAs are small business owners themselves). As a result, they might be able to provide valuable insights and advice that’s specific to your region.
Hiring a local CPA will also contribute to the local economy, since you’ll be supporting a business within your own community.
You may discover other benefits from working with a CPA near you. If you want to find a CPA nearby, TurboTax Live Full Service can connect you with a local tax expert who can prepare your taxes and possibly provide other services that can improve your bottom line.
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