Introduction
What is a CPA?
Responsibilities of a CPA
The average cost of hiring a CPA
When should I hire a CPA?
Two types of services provided by a CPA
Introduction
CPA services are those services range that help an individual to develop a personal financial plan, as well as to assist a business owner with things. Such as tax planning, financial statement analysis and understand complex financial transactions for their business decision making Certified Public Accountants (CPAs) are strategic and innovative thinkers who are respected for their commitment to excellence and integrity
They are committed to their clients and work to in order to satisfy their business and financial needs. CPAs provide different useful and valuable CPA services to their clients such as business owners, government agencies and nonprofit organizations. When one is consulting a CPA, they forming a business partnership with the CPA that values their success. In this very article, we will be able to what actually is a CPA, their responsibility and the two types of CPA services they provide.
What is a CPA?
A CPA is a specialized type of accountant that’s very good in anything that has to do with tax and who is capable to represent you before the IRS. They are tax experts who are trained to file your business’s taxes, answer crucial financial questions and, potentially. As well as to able to save your business money during tax period. While CPAs have accounting degrees, they are quite different from the traditional accountants.
They have passed the Uniform CPA Exam, a rigorous exam that is taken to test their understanding of tax law and the standard accounting practices. Equally they have received a state license, which has both character and ethics requirements. The CPA continue to take professional education courses to keep maintaining his or her license. They can easily lose their license if they are convicted of fraud, negligence, or ethics violations. Also they has unlimited representation rights before the IRS.
However, CPAs met the basic requirements of being an accountant, but they equally have more certifications and knowledge about tax law. Being a small business owner, this will be an advantageous aspect to be able to understand CPAs.
Responsibilities of a CPA
CPAs are known to wear many hats for both small and big businesses. They can handle a variety of CPA services such as bookkeeping, preparing very important financial documentation. This include tax documents and profit and loss statements, together with financial planning and tax filing.
They are very good in providing sound financial advice for your business as you continue to grow. As a business owner, it will be difficult to juggle different tasks and still run your business at the same time. Which is the reason why CPAs will be a valuable personnel. Because of the CPA services they offer for both small and big business owner. Let’s step further into the knowing the responsibilities you will be expecting from a CPA:
Tax filing, planning and advice
CPAs are well qualified to handle all your business’s tax needs.
Tax and financial compliance
When you are audited, CPAs will be there to represent you before the IRS. With their extensive knowledge, CPAs will equally help you settle financial and tax problems before they become an issue with the very IRS.
Consulting
CPAs will assist you with crucial financial decisions, such as management problems, budgets, financial risk and other financial CPA services. They will equally provide value packed advice on complicated financial matters.
Forensic accounting
CPAs will help to monitor your books and prevent fraud.
Payroll
When you’re not making use of payroll software, CPAs wil assist you with this process.
Bookkeeping
CPAs are well trained to help in creating, maintaining and reviewing your financial books throughout your business’s lifecycle.
However, in addition to bookkeeping and payroll, a CPA will assist with planning, tax advice and compliance. They will equally consult with you on your own budget and other complex financial matters.
The average cost of hiring a CPA
The simple answer is it all depend largely on your business and the CPA services that you need. Bureau of Labor Statistics has it that the median hourly wage for CPAs is $40. This can not, however, cover some particular fees for some CPA services and consultations. It’s very important to have an idea of the type of CPA services you need before you even meet with a potential CPA. This way, you will have a very clear discussion on how they will bill you. By itemizing some costs, you will get a very realistic idea of how the CPA will help your business. You’ll equally be able to weigh the cost and benefits of you deciding to outsource some services that you will be able to complete with CPA services software or other means.
While it’s difficult to pin down a concrete number for how much you will be expecting to pay a CPA. It is very important that you have a working knowledge of their basic fees and expenses. Below is a shortlist of basic expenses that you need to review before you even meet with a potential CPA:
- Paperwork fees
- Hourly rates
- Administrative fees
- Other fees and CPA services
When should I hire a CPA?
It is not necessary to hire a CPA as a full or even part time employee to be able to benefit from their knowledge of business finance. Let’s consider the things you need to a move and hire a CPA:
Before you start your business
When you’re about to launch your business and money is very tight, the idea for you to pay hundreds of dollars for some hours with a CPA may look extravagant. However, just like other startup costs, it’s an investment and it’s a very deductible expense. A CPA will help you in setting up your business correctly to avoid mistakes that might cost you more to fix. Some of the decisions a CPA will help you with as you will get your business up and running. You mat not need assistance with all of these decisions, but whwn you do, it’s useful to know who will give you professional advice.
CPAs might recommend the best structure for the business you’re launching into. The legal structure you will use to set up your business. Such as sole proprietorship, partnership, LLC, corporation or even co-op will affect your taxes, liability and your reporting requirements. It might equally be hard to change later on, and can require you to reapply for licenses. Getting a new EIN, to notify both your bank and insurance company, many other things.
They are there to help you determine whether cash or accrual accounting will be the best fit for your business. When you are about to set up your accounting software. One of the first decisions you will ask is to what type of accounting software you will use.
During tax time
CPAs may prepare your tax documents, file tax returns and also provide tax planning advice. That will help you strategize how you will minimize your tax liability for next year. Also, CPAs will represent you when the IRS has some questions about your return or you’re audited. Which is a very an important consideration.
Business taxes are quite different from your personal taxes; even when you have been the one doing your taxes yourself. You might need to hire a CPA, especially when your tax situation is very complex. For example, if you have some employees, or when you want to sell products to customers in different states or countries. Having a CPA that will handle your taxes will save you time and ensure that everything is done correctly.
Some of the ways CPAs will assist you with your taxes:
CPAs will help you understand and to comply with tax changes. When there is a change in the tax code, a CPA will help you understand how the changes will affect your business.
They will help you in understanding which deductions you are qualified for. While you need to take as many deductions as you’re entitled to. And you equally don’t need to make questionable deductions that will trigger an audit. A CPA will help you in deciding when you should or shouldn’t take some deductions.
Let’s look some instances when you may need a CPA’s advice:
- When you’re about to start a business and need to understand which startup costs are deductible and how much you will deduct.
- If you started your business as a hobby, but no profit coming in and need to understand how the IRS will classify your business and which deductions you will take.
- When your home and small business intermingle, and you are confused which expenses are deductible.
- You have children and need to know if there are any tax breaks you will take advantage of.
Occurance of special circumstances
As you are running your business, there might be instances when you will need a CPA’s expertise. For instance, when you receive a letter from the IRS that notifies you that you are to be audited. Probably when it simply request an additional information about your return, you will need to hire a CPA to represent you. CPAs have good experience on how to deal with the IRS and will help you respond adequately. By supplying the information it needs, and be able to resolve the issue as painlessly as possible.
Additional instances of situations that will prompt you to hire a CPA:
When you are thinking about taking a small business loan. A CPA will help you to decide if business financing will fit in your long term business plans. He or she will be able to recommend the best kind of loan for your business. Equally figure out the ideal size of the loan and how payments will affect your cash flow.
When the events occuring in your life can affect your business finances or structure. You will need to hire a CPA if a member of your family member who is a business partner dies. When the business in question is a marital asset and the business owners want a divorce.
When you are about to acquire, merge, sell or close
You are facing some significant structural or operational changes in your business, like if you’re considering buying a business. As well as merging with another business, you are planning to sell or close your business, or have decided to have a new business partner or to dissolve a business partnership. You need to consult with a CPA concerning the tax implications for your business and for yourself as the owner.
If you’re about to purchase another business, a CPA will help you in analyzing the business’s financial records, verify the assets and assist you with due diligence. Or, when you are about to sell your business, a CPA will give you an idea of what the fair market value of your business is. When you are having a serious buyer, they will expect you to have your perfect accounting records, plus an accurate valuation. And you don’t have all these, you may lose potential buyers and will end up receiving a lower price.
Two types of services provided by a CPA
The types of CPA services that can carried out by a CPA and they are divided into 2 major categories; attestation services and non-attestation services.
Attestation services
There are three groups of attestation CPA services a CPA can provide when they are evaluating a business’s internal financial statements.
Audits
Auditing services are regarded as the highest level of independent CPA services available. In a layman’s term, the major purpose of an audit is to verify independently by sight, confirmation, discussion with management. As well as the assessment of internal controls and analytical process, that a company’s financial reports are substantively very correct.
Audited financial statements will include a statement of changes in a financial and detailed way. With referenced footnotes that details a company’s accounting methods, policies, and its certain financial data. Again, both the statement of their cash flows and the attached footnotes with the procedures and reporting are all governed by the AICPA, SASs, and other governing and regulatory agencies.
Audits, by nature of the work carried out, as well as the report standards required, are substantially very costly than any of the other groups of service available. Publicly traded/SEC organizations are examples of organizations that are required to have an annual audit. It would be prudent equally to consider having an annual audit carried out.
Reviews
A review is known to consist predominantly of an assessment of your company’s books and records by a performance of analytical tests, certain analytical procedures. Such as the comparison to books and records and equally calculation of some financial tests and ratios. These procedures, with their nature, are meant to give reasonable assurance to an outside reviewer. Instead of the detailed reporting and verification requirements required by an audit.
Reviews are requested frequently by banks or insurance companies issuing performance bonds who need a higher degree of service or verification than a compilation. But not to the full extent and cost of an audit. Basically, reviews equally include a statement of changes in a financial position together with the detailed footnotes.
Compilations
The lowest stage of attestation services a CPA can provide is a compilation. Importantly, a compilation is simply when a CPA compiles the books and records of their client without the performance of any substantive process. Together with independent verification or confirmation of any of your client’s balance.
Thus, a compilation is solely a representation of your company’s management as a no verification of account balances on the balance sheet. Equally, management has the option to equally exclude from the compiled statements, the statement of changes in financial positions and all the related footnotes.
Non-attestation services
CPAs are trained to perform numerous non-attestation services. The types of nonattestation CPA services that a CPAs can offer are as follows:
Internal Audit
Internal auditing is regarded as an objective assurance, independent and consulting activity that’s designed to add value and improve a company’s operations. It will help an organization to accomplish its objectives to bring a systematic, disciplined approach. To ba able to evaluatw and improve the effectiveness of the risk management, control, and governance processes.
Internal control design
They are those systems, policies, procedures, and practices that are used to prevent errors of commission and omission. It’s meant to safeguard an entity’s assets, which will include accurate financial records.
Internal controls equally promote operational efficiency and do encourage adherence to prescribed managerial policies and procedures together with the laws, rules, and regulations. You should understand that effective internal control is the cornerstone of a successful management.
Tax services
The continuous growth of tax laws and the growing complexity of financial and investment decisions have made more individuals and businesses to seek the help of a CPA. CPAs are offering tax planning methods to minimize current and future tax liabilities. They equally prepare federal, state and local tax returns. As well as help their clients comply with tax laws and regulations, and also represent their clients during examinations by difgerent tax authorities.
Business and management consulting
CPAs will assist with the formation of businesses and will provide the services needed through different stages of development, like:
- To install accounting systems and controls
- Develop cash flow models
- Identify ways to improve profitability
- Secure or restructure financing
- Provide business valuations
- They advise on mergers, acquisitions, and divestitures
- Design employee compensation and benefits packages
- Ensure compliance with government regulations
Additional services
As client may need to emerge, so, are new CPA services. More and more CPAs are being called on to make use of their accounting, tax and financial skills together with their investigative talents. To assist people in resolving significant matters that are involving money like;
- Fraud investigations
- Bankruptcy and insolvency reorganizations
- Civil lawsuits
- Professional liability claims
- Divorce settlements