Tax & Accounting Glossary

All CPAs are accountants, but not all accountants are CPAs. A CPA (Certified Public Accountant) has passed the Uniform CPA Exam, met education requirements (typically 150 credit hours), and fulfilled state-specific experience requirements. CPAs can represent you before the IRS, sign audit opinions, and provide attestation services that general accountants cannot.

An accountant without a CPA license can still prepare tax returns, do bookkeeping, and provide financial advice. The distinction matters most when you need IRS representation, audit services, or specialized tax planning for complex situations.

TurboTax and similar software handle data entry well but can't do tax planning. Consider a CPA when your situation includes: rental property income, stock options or equity compensation, business ownership, income from multiple states, an inheritance, or a major life change like divorce, retirement, or the death of a spouse.

The general rule: if you spend more than an hour wondering whether a tax rule applies to you, a CPA will likely save you more than they cost. Tax software asks you what happened. A CPA tells you what you should do about it.

For a straightforward personal return (W-2 income, standard deduction): $200 to $500. Add a rental property: $400 to $800. Small business with S-Corp: $1,000 to $3,000. Complex situations involving trusts, estates, or international income: $3,000 to $10,000+.

Most CPAs charge either a flat fee per return or an hourly rate ($200 to $500/hour depending on geography and specialization). Year-round advisory relationships typically run $2,000 to $10,000 annually. The most expensive CPAs aren't always the best fit for your situation, and the cheapest may lack the specialization you need.

Seven questions that reveal whether a CPA is the right fit:

1. How many clients in my specific situation do you work with? (Look for experience, not just credentials.)
2. What's your fee structure? (Flat fee vs. hourly, and what's included.)
3. How do you handle questions between filing seasons? (You want year-round access, not just tax-time service.)
4. What tax-saving strategies would you recommend for someone in my situation? (Tests their knowledge before you commit.)
5. Who in your firm will actually do my work? (At larger firms, the partner you meet may not be the person preparing your return.)
6. How do you stay current on tax law changes? (CPAs need continuing education, but specialization matters more.)
7. Can you coordinate with my financial advisor/attorney? (Complex situations require professionals who work together.)

CPA (Certified Public Accountant): State-licensed, passed the CPA Exam, broadest scope of services including audit, attestation, and tax. Can represent you before the IRS. Best for complex tax situations and year-round planning.

Enrolled Agent (EA): Federally licensed by the IRS, passed a three-part exam on tax law. Unlimited IRS representation rights (same as a CPA for tax matters). Often less expensive than a CPA. Best for tax-focused needs without the broader accounting services.

Tax Preparer: No standardized credential required in most states. Prepares returns but cannot represent you in an IRS audit (unless they hold a PTIN with Annual Filing Season Program certification, which allows limited representation). Fine for simple returns, risky for anything complex.

Use CPAverify.org, a free database maintained by NASBA (the organization that administers CPA licensing). Enter the person's name and state to confirm their license is active and in good standing. You can also check directly with your state board of accountancy.

For Enrolled Agents, use the IRS Directory of Federal Tax Return Preparers. For CFPs, check cfp.net/verify. Legitimate professionals won't hesitate to have their credentials verified.