A CPA, accountant or tax preparer?

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Q. What’s the difference between a CPA and an accountant and a tax preparer?
— Learning

A. It’s a great question.

We want you to understand the qualifications that different professionals have so you can choose the best person to work with you.

A CPA is a certified public accountant.

There are rigorous requirements to become a CPA, said Ken Bagner, a certified public accountant with Sobel and Co. in Livingston.

He said the requirements include achieving a certain level of actual work experience, having an undergraduate degree in accounting and passing a challenging four-part exam that tests knowledge in accounting, financial statement preparation, taxes, business law, auditing and technology related to accounting functions.

“Many CPAs serve the public and work in public accounting firms advising their clients on their business as well as performing traditional accounting services,” Bagner said. “In addition, CPAs are the only professionals qualified to sign an audit report in accordance with U.S. Generally Accepted Accounting Principles (GAAP).”

He said an independent CPA — independent from the Company they are auditing — issues an opinion on the financial position, profit and loss and cash flows of a company. These opinions are used by outside investors, banks and other interested parties to gain assurance on the quality and accuracy of financial statements of a company, he said.

In contrast, Bagner said, an accountant has an undergraduate accounting degree but is not necessarily a CPA — as you need to pass the exam to become a CPA.

“The accountant could work in a CPA firm but generally works for privately held businesses or public companies, helping them by performing tasks from bookkeeping to CFO services and sometimes may even become the CEO of a company,” Bagner said.

A tax preparer may not be an accountant or a CPA.

“They can prepare tax returns but may not have earned the qualifications of accountant or CPA,” he said. “They also do not have unlimited rights to represent their clients on any matters with the IRS including audits, payment/collection issues and appeals.”

To have unlimited representation rights with the IRS, you must be a CPA, Enrolled Agent or attorney, he said.

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This post was first published in September 2016.

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