Are Accountants Tax Professionals?

Accounting is a complex industry that offers many benefits to business owners and individuals. One misconception people have is that being an accountant automatically makes someone proficient in taxes. This article aims to breakdown the difference between a bookkeeper’s skillset and a tax professional.

Bookkeeping

This is crucial for many business owners to ensure they have financial insights and can make more informed decisions from tax planning to business growth. Bookkeepers can offer many of the following services, and it’s important to ensure that the bookkeeper you select can scale with your business growth. Many bookkeepers are not CPAs, so it is important to ensure that your bookkeeper has the necessary experience and/or education in this field.

• Accounts Payable (AP)

  Function: Entering invoices into the accounting system and scheduling payments based on the discount rate or the net due date. Bookkeepers ensure that bills are paid promptly while trying to leverage any early payment discounts offered by vendors.

  Who Needs AP: Many new and small business owners may not initially need accounts payable but will eventually need to implement them as the business grows. It is important to set up your bookkeeping with a company that can handle this function, as delays in paying vendors can affect business growth.

  Insource/Outsourced: Businesses have the option to hire employees to handle this function of bookkeeping. Having full-time staff can make AP more efficient, but it comes with the cost of additional payroll. With increasing technological advances, outsourcing can be extremely cost-effective without sacrificing efficiency.

• Accounts Receivable (AR)

  Function: Billing customers/clients in the accounting system and ensuring payments are recorded against the correct invoice.

  Who Needs AR: All businesses need accounts receivable, and many new and small business owners handle this on their own. Accurate AR can expedite collecting payments and is important for accrual or cash basis accounting.

  Insource/Outsourced: Large companies typically have staff to handle AR to ensure payments are always collected and recorded properly. However, many bookkeeping companies offer this service and can manage AR with the same efficiency for a fraction of the cost.

• Payroll

  Function: Onboarding new employees, offboarding employees, payroll processing, and journaling payroll into the accounting system.

  Who Needs Payroll: Any company with employees requires payroll processing. Timely payroll is crucial, as delays can lead to legal issues between employees and employers.

  Insource/Outsourced: Most companies use third-party payroll systems to process payroll. However, large companies may still hire specific payroll specialists for onboarding/offboarding and payroll approval/processing.

• Transaction Recording/Reconciling

  Function: Recording all asset and liability transactions in the accounting system. At the end of every month, reconcile bank statements to the accounting system.

  Who Needs Transaction Recording: Every business and self-employed individual should have this process. While some self-employed individuals may manage this on their own, without a proper accounting background, inaccuracies can occur. It is important to have someone with accounting experience record all transactions to avoid classification mistakes.

  Insource/Outsourced: Large businesses have teams to handle recording and reconciling asset and liability accounts. This can be outsourced to bookkeeping companies that manage your accounting.

Tax Accountant

Everyone deals with taxes, and for some, taxes are due more than just once a year. If you are self-employed, then you know there are quarterly income taxes. Businesses that are partnerships, multi-member LLCs, S-Corps, and C-Corps all have separate business returns as well. Lastly, if you own a business that collects sales tax, it needs to be reported monthly, quarterly, or annually, depending on the state and amount of sales tax collected.

• Preparing and Filing Taxes

  Function: With all information provided to the tax professional, they will prepare the tax return. A tax professional is crucial for individuals and business owners to ensure the return is accurate and not missing any eligible credits/deductions.

  Who Needs Professional Tax Preparing: Everyone can benefit from a tax professional preparing their taxes. People who need a tax professional include the self-employed or those with complicated portfolios. Tax professionals can specialize in individual, business, or both. It is important to ensure your tax professional can handle the tax preparation you need. If you own a business, a tax professional usually works with your bookkeeper to obtain the necessary information.

  Outsourced: Most businesses outsource their taxes to a CPA Firm or a tax professional business.

• Tax Planning

  Function: Provide guidance to lower the tax burden for the following years.

  Who Needs Tax Planning: Everyone can benefit from tax planning.

  Outsourced: Most businesses outsource their taxes to a CPA Firm or a tax professional business.

If you are looking for an all-in-one solution where you can have all bookkeeping functions and a tax professional to handle tax compliance, then check out Wrap Up Bookkeeping. We take pride in offering precise bookkeeping services and tax professionals who can alleviate the burden of tax stress.