If you’re like most taxpayers, you may not need either a tax preparer or a certified public accountant (CPA). There are exceptions, though. Maybe you’re self-employed, own a small business or have lived in several jurisdictions. In these cases you might need some help. If so, here’s your rule of thumb: Hire a tax preparer if you generally understand your finances and just want to make sure your taxes get done right. Hire a CPA if your financial questions extend beyond simply preparing and filing tax forms.

For help with both taxes and other financial considerations, consider working with a financial advisor.

CPA Definition

A certified public accountant, or CPA, is a full-service financial professional. The title of CPA is a formal credential issued by the American Institute of Certified Public Accountants, or AICPA. It means that this person is a professional accountant who has also met the standards for CPA certification. This requires two elements:

• National – A CPA must pass the AICPA’s national licensing exams and qualifications;

• State – A CPA must also meet the requirements set by any state licensing board in which they practice.

To meet the national requirements, an accountant must pass the national CPA exam issued by the AICPA each year. In addition to this exam, each state has its own requirements. Typically these state requirements include:

• Minimum educational credentials, such as a degree or a minimum number of credit hours

• Minimum relevant educational credentials, meaning that you must have dedicated a minimum amount of your studies to accounting and finance

• Professional experience, meaning that you must have worked in the field as an accountant or financial professional for a minimum number of years

• Residency, meaning that you must have lived and worked in the state for a minimum number of years

For example, New York sets the following requirements to receive a CPA license:

• You must be 21 or older;

• You must have a bachelor’s degree and 150 credit hours of post-secondary education. In the alternative, you may waive this requirement if you can show 15 years of related experience under the supervision of a qualified professional;

• Of your credit hours, at least 33 must have been in directly related financial fields, and another 36 must have been in generally related business or financial fields;

• At least one year of relevant work experience.

For a list of each state’s full requirements, see the AICPA’s website.

As with all professional certifications, many states will waive some parts of their requirements based on work experience. For example a CPA with enough experience can often waive any residence requirements that a state may have. These waiver rules exist so that mid-career professionals can move without significant career interruptions.

You might want a CPA if your finances are complicated year-round. Someone who has to manage large sums of money, for example, or who runs their own business may want to have a CPA manage their books. The same is true for someone who works in several jurisdictions continuously. When your finances raise complicated issue on an ongoing basis, a CPA is often the right choice to stay on top of that.

This includes preparing and filing your taxes. Someone with complicated finances will often benefit from advance tax planning, whether they’re setting up a trust or maximizing deductions. A CPA can help with that.

Tax Preparer Definition

Tax preparer is a formal professional license granted by the IRS. It is awarded to professionals who meet two requirements:

• First, they have taken and passed the Special Enrollment Examination of the IRS;

• Second, they continue to meet the IRS continuing education requirements. At time of writing this meant taking at least 72 hours of continuing education every three years, with at least 16 hours every year.

A tax preparer is also known as an enrolled agent. They are certified to prepare your taxes and apply the tax code to your specific financial situation. Like a CPA they are also licensed to sign your taxes as a tax preparer and file on your behalf.

However, this is the limit of a tax preparer’s expertise. A tax preparer is not necessarily qualified to advise you on general accounting and financial questions, nor are they necessarily qualified to help you manage your tax situation before it’s time to file. Their expertise is narrow and specific: They can tell you what you owe or are owed on April 15. Although readers should note that many tax preparers are also accountants, investment advisors or financial professionals in their own capacity.

A tax preparer is generally the right choice for you if you have questions specifically about preparing or filing your taxes. If you want to maximize any potential deductions, or generally at your mind at ease come tax time, this may be the right person for you. More likely, if you have complicated finances that you understand most of the time, a tax preparer might be the right choice. They can make sure that you follow the rules and don’t miss anything.

The Bottom Line

A CPA is a full-service financial professional, and is generally the right choice for someone who wants accounting help year-round or who would benefit from making good tax choices in advance of filing. A tax preparer is someone who is licensed to prepare and file taxes, and is generally the right choice for someone who specifically needs help when it comes time to file.

Tax Tips

• If you have complicated finances you might need a CPA. If you have very complicated finances, you might need a tax attorney. Read on to learn all about the difference.

• A financial advisor will help you with taxes and with other financial questions. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

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