When Should You Hire a CPA or Tax Professional?

If you’re heading up a business, knowing when to outsource your accounting and tax services can be a big decision. 

If you do hire an accounting or tax professional, it’s an additional expense. Small businesses often don’t have a lot of room in their budget for these additional costs. If you don’t, however, and something happens financially, like an error on your part, it can end up costing you a lot more than the accounting services would have. 

So how do you know what’s right for your business?

Are a CPA and an Accountant the Same Thing?

First, the basics—are a CPA and an accountant the same thing? The answer is almost, but not quite. 

An accountant is usually a financial professional with a bachelor’s degree in accounting. A CPA stands for Certified Public Accountant, and this is a professional designation earned after finishing certain educational and work requirements and then passing an exam. 

The requirements to become a CPA are specific to your state, but a CPA does tend to have a deeper level of knowledge than an accountant. 

A CPA can also do certain things that accountants can’t. 

Some of the things CPAs do for businesses include:

• Updating and maintaining a company’s accounting policies and procedures
• Overseeing the creation of budgets
• Doing internal audits to make sure reporting is accurate
• Creating reports for tax purposes or for government audits
• Preparing financial statements
• Presenting financial statements when necessary
• Managing Accounts Payable and Accounts Receivable
• Ensuring the business is staying on top of changes in government regulations

When Should You Hire a CPA?

If you’re not sure whether or not hiring a CPA is right for your business, there are a few things to know. First, you don’t have to hire a full or even part-time CPA. A lot of CPAs work with small businesses as freelancers or contractors. 

If you have just started a new Business Startup, you should immediately be looking to hire the best CPA for your organization. This will help you ensure that you have established a firm financial foundation for the startup right from the get go. This is essential when you would be looking to raise funds from investors later on. They will be closely scrutinizing your financial foundations right from the time you started the company.

At that point, a CPA can help you avoid potential mistakes in the set-up and structure of your business that could be expensive to fix. 

In the early stages of starting a business, a CPA can also help you determine whether cash or accrual accounting is right for you. 

New businesses tend to use cash accounting because it’s easier, but sometimes the IRS requires accrual accounting. 

Another time to hire a CPA is when tax time is approaching. Your goal is, of course, to  minimize your tax liability. Also, you may be happy to have a CPA guiding you if the IRS has questions about your return or you’re being audited. 

Business taxes are quite a bit different from personal taxes, so even if you’ve always done your personal taxes, you may not be prepared for the complexity of doing them for your business. This is especially true if you have employees or you sell in multiple states or countries. 

The tax code also changes frequently, and a CPA will know what all these changes mean for you. 

A third situation to think about hiring a CPA is if you’re facing a special circumstance, such as an audit, which was briefly mentioned above. Sometimes the IRS will simply ask for additional information about something in your return, and you’ll be better off having a CPA represent you. 

If the IRS has a question or request for you, a CPA will know how to provide the right information and get the issue solves and closed out. 

There may be events in your personal life with the potential to affect your business financial situation, such as a marriage or a divorce. 

The Benefits of Hiring a CPA for Your Business

If you do hire a CPA, you might end up finding it’s one of the best choices you make for your business. A CPA can also help you stay out of legal trouble, which can arise from issues with your taxes. 

There are a lot of benefits, including the fact that a CPA can help you save money. CPAs can also help you if your business is in the midst of a big change, like a merger or a new partnership. 

Trying to do your own taxes and bookkeeping may seem like a good way to save money as a business owner, but it can also be a decision that you find you ultimately regret. Being proactive and hiring a CPA can help your business sustainably grow.