Certified Public Accountant: What CPAs Do, When to Hire One
CPAs are accounting professionals who can work on many financial tasks, including audits and tax prep.
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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.
Is hiring a CPA worth it?
Calling a tax-focused CPA can make sense if you have anything more than a basic tax situation, if you have a special tax situation to deal with or you want extra guidance. If you need to fix a past return, make estimated tax payments, catch up on filing for prior years, need a tax extension or just want extra help with your paperwork, a tax pro can help you to get back on track.
CPAs can also provide small-business tax advisory services, as well as big-picture tax and financial planning, which might be particularly helpful to people who are self-employed.
If you’re familiar with the basics of how to file your taxes and have a fairly simple tax situation, you might find that tax software is helpful enough to do your tax return (some taxpayers may even be able to do their taxes for free).
» MORE: Our picks for best tax software
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 often conduct audits — assessments of a business’s records and financial statements. They can also hold controller or chief financial officer (CFO) positions, depending on their skill level and education.
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What is the difference between an accountant and a CPA?
Typically, an accountant is a person who has a degree in accounting. However, the general term “accountant” is largely unregulated.
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.
» MORE: How capital gains tax works
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.
» MORE: CFP or CPA? Know the difference
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, financial accounting and reporting, taxation and regulation, and a discipline section covering business analysis and reporting, information systems and control, and tax compliance and planning. To pass, candidates must earn a score of at least 75 on each section.
