Understanding the difference between an accountant, bookkeeper, CPA, and EA can feel like a lot to grasp. Each role offers distinct expertise in many accounting tasks. But how do you determine which one is right for your practice?
This article will clarify the functions of these professionals and what constitutes legal financial advice, helping you make informed decisions for your therapy practice’s financial health. With each quarter demanding meticulous attention to finances, understand your accountant’s role in your success.
Further reading: Benefits of Having the Same Accountant for Your Bookkeeping and Taxes
What is an Accountant?
An accountant is a broad term for a professional who performs various accounting functions, including:
- Financial Reporting: Preparing financial statements like balance sheets, income statements, and cash flow statements.
- Tax Preparation: Handling tax returns and ensuring compliance with tax laws to help save money on your taxes.
- Consultation: Offering advice on financial strategies and business decisions to grow your business.
Key Responsibilities of an Accountant
Accountants help therapists manage overall financial health, provide insights into profitability, and ensure that financial practices comply with regulations. An accountant can handle the financial data necessary for making informed business decisions, ensuring your therapy practice complies with all regulations.
Accounting software like QuickBooks Online can streamline invoice generation and payment management tasks. Hiring a professional accountant for your therapy practice ensures you take advantage of all possible tax deductions.
The Role of a Bookkeeper
A bookkeeper handles the day-to-day financial transactions and maintains accurate financial records. Their duties include:
- Transaction Recording: Logging all income and expenses to keep track of business transactions.
- Reconciliation: Ensuring the accounts balance by comparing ledger entries with bank statements.
- Payroll Processing: Managing payroll and employee benefits.
How Bookkeepers Support Therapists
Bookkeepers help therapists maintain organized and accurate financial records for making informed business decisions and for accountants to use in financial reporting and tax preparation. By using accounting software, such as QuickBooks Online, bookkeepers can efficiently manage financial records and update them regularly, making it easier for accountants to file your taxes and estimate quarterly taxes.
Understanding the CPA (Certified Public Accountant)
CPAs are accountants who have passed the rigorous CPA exam and met additional state certification and experience requirements. Their services include:
- Audit Services: Conducting thorough examinations of financial statements to ensure accuracy.
- Tax Planning and Preparation: Offering advanced tax planning strategies and preparing complex tax returns.
- Advisory Services: Providing high-level advice on financial planning, risk management, and business strategy.
Benefits of Hiring a CPA
CPAs offer therapists a higher level of expertise, especially in complex financial situations, compliance issues, and strategic financial planning. A CPA is often the best choice if you need someone to handle your quarterly taxes. They can provide valuable tax advice and help ensure all deductible expenses are properly accounted for.
A CPA can be a significant investment, even though their services might seem costly upfront, because they protect your practice’s financial health and compliance with regulations. Here’s why you should consider hiring a CPA:
- Tax Advice: A CPA provides specialized tax advice, ensuring all your deductible expenses are properly recorded, which can save you money.
- Quarterly Taxes: They can prepare and file your quarterly taxes, ensuring accuracy and compliance with IRS requirements.
- Client Budget Solutions: CPAs help manage your budget, offering solutions that align with your financial goals.
- Legal and Compliance Issues: CPAs ensure your practice complies with HIPAA regulations and other legal standards, protecting your mental health practice from potential legal issues.
The Role of an EA (Enrolled Agent)
EAs are tax professionals the federal government authorizes to represent taxpayers in dealings with the IRS. They specialize in:
- Tax Preparation: Preparing and filing tax returns for individuals and businesses.
- Tax Resolution: Representing clients in audits, collections, and appeals.
- Tax Advice: Providing specialized advice on tax matters and compliance.
Why Therapists Might Choose an EA
EAs are ideal for therapists who need expert assistance with tax issues, including representation before the IRS during audits or disputes. They help save money on your taxes and ensure all deductible expenses are accounted for, providing a significant advantage for your therapy practice. Here’s how EAs can benefit your practice:
- Cost-Effective Solution: EAs often charge lower fees than CPAs, making them a more affordable option for smaller practices.
- Expert Tax Resolution: They provide expert representation in tax disputes, protecting your practice from costly penalties.
- Specialized Advice: EAs offer tailored tax advice, ensuring your financial records are accurate and up to date.
- Comprehensive Support: They help manage your tax-related documents, such as receipts and invoices, ensuring compliance with IRS regulations.
Further reading: Mastering Full Charge Bookkeeping: A Comprehensive Guide for Beginner, Intermediate & Advanced Bookkeepers
Considerations for Hiring Financial Professionals
Are you deciding between a CPA and an EA? It's important to consider your practice’s specific needs. Here are some considerations:
- Complex Financial Situations: If your practice faces complex financial scenarios or requires strategic financial planning, a CPA is often the best choice.
- Tax Disputes: For ongoing tax disputes or IRS audits, an EA provides specialized representation.
- Budget Constraints: If your budget is limited, an EA might be a more cost-effective solution.
- Professional Network: Interview several accountants to find the best fit for your practice. Networking with other therapists can provide referrals and insights into reliable professionals.
Key Takeaways
- Accountants vs. Bookkeepers: Bookkeepers handle monthly financial records and billing, while accountants provide broader financial advice, often on a quarterly basis.
- CPAs (Certified Public Accountants): CPAs stand out due to their certification and ability to handle complex tax issues, making it worth the invest for your practice’s business needs.
- EAs (Enrolled Agents): EAs specialize in tax preparation and representation before the IRS for those who find it difficult to balance their practice and tax obligations.
- Consulting Professionals: You’ll need to look around for an accountant who fits your needs. Consult with a business advisor or attorney to ensure best practices and compliance with health information regulations.
- Choosing Services: You’ve got options—bookkeepers for daily tasks, accountants for one-time or retainer services, and CPAs or EAs for more specialized needs. Each person should consult professionals to afford the best care for their practice.
How can Taxfyle help?
Finding an accountant to manage your bookkeeping and file taxes is a big decision. Luckily, you don't have to handle the search on your own.
At Taxfyle, we connect small businesses with licensed, experienced CPAs or EAs in the US. We handle the hard part of finding the right tax professional by matching you with a Pro who has the right experience to meet your unique needs and will manage your bookkeeping and file taxes for you.
