Certified Public Accountant: What a CPA is & How They Help With Taxes

certified public accountantEach year millions of taxpayers find themselves asking whether or not they need the help of a tax professional. When the answer is yes, it becomes important to understand who is the best person to handle different types of tax issues. The answer is not the same for everyone and each individual must carefully consider their own personal tax situation as well as the type of person best trained to handle those situations. Here we look more closely at Certified Public Accountants (CPAs) and the type of tax situations best handled by this tax professional.

What is a CPA?

In the world of tax professionals, certain individuals are permitted to perform specific tasks based on their experience and training. An accountant is an individual trained in maintaining and auditing reports for a business. Accountants prepare financial reports and provide much needed documentation regarding a businesses financial background. While not all accountants can be a CPA, all CPAs are considered an accountant. In order to be titled a CPA, an individual must take and pass tests administered by the American Institute of Certified Public Accountants. Depending on the state in which a CPA wishes to conduct business, there may be additional state exams that must be passed in order to work in that state as a CPA. Accountants who have not received the additional training required to be a CPA may not be permitted to handle some of the tasks a CPA is authorized to perform. As a CPA, an individual can perform all accounting tasks in addition to the preparation and filing of tax returns for individuals, businesses and corporations.

How can a CPA help you?

As a licensed professional, a CPA must take continuing education courses to equal 120 hours every three years to maintain their license. This ensures each licensed CPA is receiving the training and education necessary to remain abreast of changes in the industry. For this reason a CPA is best qualified to handle tax issues for both businesses and individuals. The following are some of the tax issues for which a CPA can provide assistance.

  • Provide advice in the handling of income tax and estate tax in the case of divorce or separation.
  • Determine the tax consequences resulting from certain investment opportunities.
  • Help individuals improve tax management and save money.
  • Advice business owners of tax consequences associated with most business decisions.
  • Design and manage the compensation and retirement plans of a business, with the proper attention to tax liabilities and savings.
  • Represent a business or individual in relation to IRS issues.  This may involve preparing documents, or presenting oral and written arguments to appeal an IRS decision.

Any person or business can benefit greatly by seeking the counsel of a CPA with regards to most tax issues. As highly trained professionals, these individuals have a greater understanding of the complex tax codes which govern how much we pay in or receive back from the IRS.