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What is a CPA? And when might you need one? Although these accounting pros usually come to mind when it comes to filing income taxes, they can help with quite a few other things.
What is a Certified Public Accountant (CPA)?
CPA stands for certified public accountant. It’s a credential an accounting professional can earn to demonstrate expertise in their field. Becoming a CPA requires passing an exam and fulfilling several education and experience requirements.
Internationally, accounting professionals with similar education and credentials are called CAs, or charted accountants.
How do you become a CPA?
To earn a CPA title, candidates must pass a 16-hour test called the Uniform CPA Examination. Before taking the exam, they must also meet an education requirement. Typically, that means completing 120 to 150 hours of credited coursework, with a minimum of 24 hours focused on accounting and 24 hours focused on business courses.
Becoming a CPA means meeting specific experience and ethics requirements, too. The state usually sets those parameters, but generally, you can’t officially be called a CPA until you’ve apprenticed under one for at least a year.
Once an accountant has earned a CPA license, some work is required to maintain it. Many state boards ask certified public accountants to take additional courses throughout their careers to keep their skills sharp and up to date.
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What is the CPA exam?
The certified public accountant exam, formally called the Uniform CPA Examination, is a nationally administered test that sets the standards for the skills and knowledge CPAs must possess.
The exam has four sections: auditing and attestation, business environment and concepts, financial accounting and reporting, and regulation. To pass, candidates must earn a score of at least 75 on each section.
What do CPAs do?
People often think of CPAs when they think about tax preparation and filing, but these professionals can work in several industries, depending on their focus. This can include tax planning, financial reporting or working as an accountant for a private or public company.
CPAs are often the people who are called in to conduct audits — assessments of a business’s paperwork and financial statement. They can also hold chief controller or chief financial officer (CFO) positions, depending on their skill level and education.
What is the difference between an accountant and a CPA?
Typically, an accountant is a person who has a degree in accounting from a higher education institution. However, this is not an official requirement because the general term “accountant” is largely unregulated in the U.S.
Accountants can provide similar services to a CPA, but CPAs are distinct from accountants in a few ways:
CPAs can represent their clients in front of the IRS for audits, appeals and collection issues because they have what are called “unlimited representation rights.” Accountants who are not CPAs, enrolled agents or tax attorneys may not have this right.
CPAs have the right to prepare and audit financial statements, whereas general practice accountants do not. This is particularly important for public companies that are required to submit audited statements to the Securities and Exchange Commission annually and quarterly.
How can a CPA help with my taxes?
If you’re wondering how a CPA can assist you with taxes and whether you need one’s help in the first place, you can start by asking: Why do I need help, and what kind of help do I need?
If you’re not sure where to start when it comes to filing, many resources can walk you through how to file your taxes. Once you’ve got the basics down, you might find that quality tax software is often helpful enough to get your annual tax forms in — some taxpayers may even be able to do their taxes for free.
» MORE: Our picks for best tax software
Calling in a tax-focused CPA could make sense if you’re struggling to figure something out about your tax life, have complex needs or have questions you could use extra guidance with. If you need to file for a tax extension, for example, because you need extra help with your paperwork, a tax pro can help you to get back on track.
Certain people, such as business owners and those who are self-employed, might find working with a CPA beneficial because CPAs can also provide small-business tax advisory services, aka big-picture tax and financial planning, that might be particularly helpful to these taxpayers.
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