Accountant, Bookkeeper, CPA, EA

So what is the difference?

Today I am answering the most commonly asked question I receive.

So many people arrive confused as to what I actually do and offer. What is it I do? What is it I offer? Do bookkeepers do taxes? What are the key differences between roles?

I am going to break those down here in a very deep and comprehensive guide to the different roles. Feel free to drop your related questions below, or send them my way.

Accountant

An accountant can be called many things. Generally speaking, they are tax accountants and handle your tax filings. They have around 200 clients and are the end step of the accounting biz flow. They offer advisory and I have noticed, there are a few good accountants out there and many more that do not manage their time well and are beyond tricky to reach. An accountant that disappears is a human who can not manage their time well. Don’t blame the field, and do your best not to bring that baggage onto the next person. I know it will be hard, but use resources such as Yelp and Google to check their reviews. It usually says a lot about how they interact with clients. I have a very small list of accountants I collaborate with. Most I have met don’t meet my standard of communication, as I prefer those who are organized, responsive, and reliable, just as I strive to be in my working relationships. Advisory is in the realm of tax, in my opinion, you should seek advisory and tax strategy from your accountant, not your bookkeeper (unless your bookkeeper is an accountant too).

Bookkeeper

Bookkeeping is the service that I offer. A bookkeeper is someone who is more involved in the day to day of business accounting. We track income and expenses closely and reconcile accounts on a monthly, quarterly, or annual basis to ensure everything is accurate. Many bookkeepers only review the profit and loss, but a good bookkeeper will review the balance sheet as well. The balance sheet is where items such as assets live. We generally do not offer advisory on taxes, and balance sheet questions would be answered by your tax accountant (Accountant, CPA, or EA).

One thing I notice a lot as a bookkeeper, is that sometimes when businesses hire me, they think their work is done and they can wipe their hands clean and call it a year. It is not. You need to be involved in the finances of your business. If you lose touch you can get ripped off, or worse, lose sight of your business revenue and go under. Hiring a good bookkeeper can be tricky, but I always say trust your gut. If something feels off, manage your emotions, confirm it is not your fear around money and trust holding you back, and decide if this person feels right. Maybe you are coming to a new bookkeeper with someone having stolen money from you, needing to remove a partner from your biz, or not feeling as if you have a lot to offer. A good bookkeeper offers a ton of value, but it is also on you to be involved and have a pulse on your business.

A good way to know if you are ready for a modern bookkeeper is to enquire internally on your personal responsiveness to both email questions and if you make enough money to afford one. Most of my friends including myself charge around $550 per month for monthly services minimum. I base it off of transaction volume, some people have other methods. If a business owner has lower volume, some revenue, and values the offering, I may offer a concession. I am based out of California, so you should adjust the rates based on your state. Expect to spend two to three percent of gross revenue on your bookkeeping per annum.

Bookkeepers are the initial step and good to have to set up your accounts online, support with a good proper system, maintain your books on a monthly, quarterly, or annual basis, and to connect with more frequently if supportive. I connect with clients a couple of times when on-boarding and then one to two times per year. Most bookkeepers I know have around 15-20 clients per year.

Do I still have your attention? Superb, let’s continue.

CPA

A CPA is a Certified Public Accountant. Similar to an accountant, their roster is usually around 200 clients and they are the end step, offering advisory services. A Certified Public Accountant is a highly qualified financial professional who has met rigorous educational, examination, and experience requirements set by state boards of accountancy. While both CPAs and accountants work with financial information, CPAs are distinguished by their advanced certification, which grants them additional privileges and responsibilities. CPAs must pass the challenging Uniform CPA Examination and fulfill ongoing education requirements to maintain their license. This advanced credential allows CPAs to offer a broader range of services compared to non-certified accountants.

CPAs can perform audits of public companies, represent clients before the IRS, and provide expert testimony in court. They offer comprehensive financial services, including tax preparation and planning, financial statement auditing, forensic accounting, business consulting, and personalized financial advisory services. CPAs are held to strict ethical standards and are often considered the most trusted advisors in the financial realm, providing critical insights and guidance to individuals, businesses, and organizations on complex financial matters.

How are they different from Bookkeepers and Accountants?

Certified Public Accountants provide a comprehensive suite of financial services that extend far beyond basic accounting. In the realm of financial analysis, CPAs utilize their expertise to interpret complex financial data, offering valuable insights into a company's financial health, performance trends, and potential areas for improvement. They conduct in-depth examinations of financial statements, cash flow patterns, and key performance indicators to help businesses make informed decisions and optimize their financial strategies.

Tax planning is another crucial area where CPAs excel. They stay in the know on ever-changing tax laws and regulations, enabling them to develop sophisticated tax strategies that minimize liabilities while ensuring compliance. CPAs offer proactive advice on tax-efficient business structures, investment decisions, and estate planning.

In auditing, CPAs play a vital role in ensuring financial transparency and accuracy. They conduct thorough examinations of financial records, internal controls, and reporting processes, providing assurance to stakeholders and identifying potential risks or irregularities. Additionally, CPAs offer strategic business advice, leveraging their financial acumen to guide companies through critical decisions such as mergers and acquisitions, expansion plans, and long-term financial planning. Their ability to blend financial expertise with business insight makes a good CPA invaluable partners in driving organizational growth and sustainability.

People often ask me why I am not a CPA, and my reply is that I do not want the stress of keeping up with the ever changing tax laws and difficult clients. I do believe that I could be supportive in that way, and I prefer to refer people to those who offer this service and it is their area of expertise.

I have found a lot of not so good CPAs out there, and I don’t know why. If you are in search of a good CPA, I do have a very small list of referrals I can share from professionals whom I trust.

Also, you will want to hire a CPA who understands the tax laws in your state. Many out of state providers do have this capacity, but you will want to inquire to confirm.

Enrolled Agent

An Enrolled Agent (EA) is a federally authorized tax practitioner who holds the highest credential awarded by the U.S. Department of the Treasury. These professionals are empowered to represent taxpayers before the Internal Revenue Service (IRS) for tax issues including audits, collections, and appeals. To earn this distinction, individuals must either pass a comprehensive Special Enrollment Examination or have worked for the IRS for at least five years in a position regularly applying and interpreting tax laws.

Enrolled Agents have a broad scope of practice in the realm of taxation. They can advise, represent, and prepare tax returns for individuals, corporations, partnerships, trusts, estates, and other entities required to report to the IRS. Unlike CPAs and attorneys who may specialize in various financial or legal areas, EAs focus exclusively on tax matters. They have unlimited practice rights nationwide, allowing them to represent clients across all 50 states and U.S. territories.

The responsibilities of an Enrolled Agent encompass a wide range of tax-related services. These include tax preparation for individuals and businesses, representation before the IRS in matters such as audits and appeals, and offering advice on tax planning strategies to minimize liabilities. To maintain their credential, EAs are required to complete ongoing education to stay current with ever-changing tax laws and regulations. This commitment to expertise, combined with their specialized focus on taxation, makes Enrolled Agents valuable professionals for individuals and businesses seeking comprehensive tax services and representation.

I personally have worked with Enrolled Agents, and seek advice from my friends who are CPAs. Both can advise, and I recommend you find someone you feel is most supportive to your personal learning style. With anyone you hire, you will need to learn to release some of your anxiety around money, ideally with a personal therapist or someone who can hold space. As someone who works in the realm of other people’s money, I find there is a lot of boundary crossing emotional dumping, which is really exhaustive, and this also leads to a very high suicide rate in the profession as clients place a lot of blame on financial professionals. Now, there are people out there who are not good at their jobs, but there are also really good people who are just busy and human and doing their best. That deserves a bit of understanding too. So what I am sharing is, do your best not to be an unreasonable person.

If this was comprehensive and helpful, drop a comment in the chat!

Gemini out!

~S

.

.

.

Written under a Gemini sun and a Taurus moon, feeling fancy.

An invitation

As a bookkeeper who supports clients with their finances, I recently faced a personal challenge: my own taxes fell behind due to difficulty finding a trusted tax accountant. To address this, I took a really big step at the end of the month and decided to delegate my bookkeeping out and partnering with Collective, a comprehensive financial solution for self-employed professionals.

Collective is assisting me with:

• Filing my business tax returns

• Providing ongoing bookkeeping support

• Offering a robust financial management system

If you're also struggling to find the right tax support, Collective might be a valuable interim solution. They specialize in serving self-employed individuals with a full-service approach to financial management.

I have a referral relationship with Collective. If you're interested in learning more, you can use my referral code for a discount: Explore further

If you want to connect with someone before signing up (which I recommend you do), I will gladly facilitate connecting you with my person. Just reach out and ask! Here is an overview of their offerings: Collective service overview

Finding the right financial support is crucial for any business owner. Whether it's Collective or another service, I encourage you to prioritize your financial health and seek support when needed.

This is not hot potato of emotions y’all.

.

.

.

Slowing emerging from finals like it’s December 31st of 1999. Grateful for your patience as I wrap up finals and prepare to transfer to Uni.

And now, for a video on money and feelings. Thank you Cut!

p.s. Am I the only one who noticed if we had a ‘d’ in the title sequence it would create a perfect start to the alphabet? Pretty swell huh?