When people talk about tax, they mean two things. Tax planning (planning transactions before they happen) and tax compliance (filling out forms, applying for credits, calculating, etc.). There are four choices: EA, CPA, tax attorney, and non-credentialed accountant. There are differences in what each professional will do for you or your business.
If you are in the habit of getting your bookkeeping done by a CPA, they offer tax service, and they seem knowledgeable, it probably won’t hurt to have the CPA do your taxes. They know all your financials anyway, and it’s easier to have it all done by the same person. For complicated, out-of-the-norm things, though, it might be better to tread with caution. A CPA who does small business is probably good at things like personal taxes and low business tax compliance. Any more than that, and it depends on how up-to-date they are in their CPE.
It’s hard to say without knowing what you want your tax person to do. We’re going to assume that all four are equally competent and ethical. If you want someone to file your taxes, then the EA or NCA will be more cost-efficient. (Tax software or doing your taxes is the MOST cost-efficient, but if you’re looking for a tax person, you have already decided you want someone else to do it.)
If you want to think about a more complicated scenario, then it starts getting a little confused. Estate planning and need to figure out the most tax-efficient way to pass your millions on to the next generation? Incorporating a partnership? Dissolving a business? Do you need to be clear what your needs are?
EA vs. CPA: A Note
Some of the EAs are accountants that decide to go for an EA exam instead of the CPA exam because they are mostly not interested in auditing and attestation work. They are most often compared to CPAs in terms of experience and knowledge. In addition to this, an EA can be an acceptable substitute for a CPA within an organization’s tax branches.
For all that, though, EAs are looked down upon, because the requirements to sit for the exam are… zero. If you think you want to take the SEE, go for it; all you need is to be 18 years old! If you’re going to take the CPA exam, you have to complete specific college or certification courses.
For example, if a person is MS in Accounting and is having over 150 hours of college and graduate education by the time they graduate. Their graduate GPA is almost 4.0. However, they are ineligible to sit for the CPA exam because the specific courses they took in college don’t match up to the CPA requirements.
Moreover, they could go to a different state and take the CPA exam there instead. If the CPA is living and working in another country, and they don’t have any interest in audit or attest work, they should get the EA license instead. If you want to make partner in a firm, you will ultimately have to get the CPA license down the road (legal requirements having to do with firm formation/partner qualifications), and clients respond better to someone with CPA behind their name.
Last Words
The accountant credential doesn’t necessarily matter, but it’s a useful shorthand for their experience/education/background/training. Ultimately, choosing a good accountant is like choosing a doctor/lawyer/dentist/any other professional. Get to know them and what they specialize in or like to do. Make your choice from there! Above all, find a financial professional you can trust. They’re going to know a LOT about some very private details of your life. Pick an accountant the way you’d pick a reliable partner: think carefully, throw away arbitrary requirements, and go with what works best for YOU.
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