Tax Accountant vs. CPA: Main Differences and Comparison
March 01, 2023
If you own a business, the chances are that you need help from a professional knowledgeable in the field of accounting. However, you don’t have much choice—you can pick either a CPA (certified public accountant) or a tax accountant.
But what is the difference between the two? Tax accountant vs. CPA—which professional is more suitable for your business, and which should you hire? Even though they seem quite similar at first, they are actually rather different.
This article will explain these important accounting roles and break down the differences between tax accountants and CPAs. By the end, you’ll be able to choose the appropriate professional for your business.
So, without further ado, let’s get right to it!
What is a Tax Accountant?
The main job of a tax accountant is to be a tax preparer and to record and report all financial transactions within a business. However, in most companies, they also have the responsibility to:
- Recommend financial practices and prepare financial statements
- Prepare financial statements, related schedules, and disclosures
- Ensure that all financial documents and tax returns within a business are accurate
- Help small business owners comply with relevant tax laws, regulations, and tax codes
Generally, with some training, anyone can be a tax accountant without having a professional degree as long as they have the necessary skills to complete their work. They just need to be detail-oriented and analytical and know their way around loans and taxes.
What is a CPA?
A certified public accountant (CPA) analyzes and reports financial data for various businesses. The CPA is a designation that is only issued in the United States and isn’t international. For example, “CPA” in Canada stands for “Chartered Professional Accountant.”
Among other tasks, CPAs in the US must also:
- Oversee and participate in the creation of budgets for companies
- Prepare audit reports for tax purposes and government audits
- Review compensation, benefits, and spending of the company budget
- Prepare financial statements for the company management
- Take care of accounts receivable and accounts payable
- Represent clients before the Internal Revenue Service (IRS)
- Stay current with relevant tax laws, government regulations, and industry standards
- Establish and maintain companies’ accounting policies and procedures (e.g., bookkeeping methods, monitoring, reporting, etc.).
Note that, to get hired, CPAs need to meet state licensing requirements, which vary by state. Typically, these include obtaining a bachelor’s degree in accounting and passing the CPA exam.
Tax Accountant vs. CPA: 5 Key Differences
Now that you’re familiar with the roles of tax accountants and CPAs, let’s break down the key differences between the two!
#1. Licenses
The most notable difference between tax accountants and CPAs is that the latter need to graduate in accounting and meet strict licensing requirements provided by the American Institute of Certified Public Accountants (AICPA).
Anyone wanting to become a CPA must finish accounting studies and acquire licenses before applying for the position. On top of that, after graduation, all CPA candidates must acquire a year of experience under the supervision of a senior CPA.
Finally, they must pass comprehensive tax, auditing, and accounting skills tests. Even then, the studies don’t stop for CPAs, as they’ll have to take continuing education classes to stay up-to-date with the latest updates and issues in the accounting world.
On the other hand, tax accountants aren’t required to take any courses and can be trained by a senior accountant.
#2. Responsibilities
As previously mentioned, the responsibilities of tax accountants and CPAs vary quite a bit. This is mostly because the latter can perform certain duties that the former can’t due to a lack of expertise and knowledge.
For instance, thanks to the licensure CPAs get, they can perform the attest function. Attest function is the process of reviewing the company’s financial statements, which tax accountants, unfortunately, can’t do.
Another example are financial statement audits, which many businesses must have. Tax accountants can’t perform these, unlike CPAs, who have the required knowledge to issue these important reports.
#3. Tax Preparations
Although the primary job of tax accountants is to help businesses with tax laws, regulations, and codes, they are still at a disadvantage compared to CPAs.
A tax accountant can prepare a flawless tax return, but they are not as knowledgeable regarding tax codes as CPAs are. The latter must meet rigorous licensing requirements and pass numerous tests, which the former don’t need to do.
Lastly, another crucial difference is that CPAs can represent clients before the IRS, whereas non-licensed tax accountants cannot.
#4. Code of Ethics
Ever since the Enron scandal in 2001, the AICPA and federal and state laws require all CPAs to follow a code of ethics. However,contrary to CPAs, tax accountants don’t have a strict ethical code that they must follow.
The code of ethics requirement became even more important after the introduction of the Sarbanes-Oxley (SOX) Act of 2002. The SOX Act was passed mainly as a response to corporate and financial scandals similar to the Enron affair and is the key act in closing loopholes in accounting practices.
#5. Cost and Expenses
As you might have guessed by now, hiring a CPA is more costly than hiring a tax accountant. However, it’s no wonder the former requires higher pay, as they spend years pursuing education and licenses.
On the other hand, not every company needs to pay more for a CPA, as they might not need the full scope of their capabilities. Some small businesses can do perfectly well by hiring a more affordable tax accountant.
Tax Accountant vs. CPA: Compared
Now, let’s summarize the main differences between tax accountants and CPAs in the table below:
Difference | Tax Accountant | CPA |
|---|---|---|
Attestation | Tax accountants cannot provide attestation services. | CPAs can provide attestation services. |
Licensing | Licensing isn’t required for tax accountants. | Licensing is required for CPAs. |
Standing Before the IRS | A tax accountant can’t represent you before the IRS. | A CPA can represent you—a taxpayer—before the IRS. |
Signing Tax Returns | Tax accountants can’t sign tax returns or prepare tax audits. | CPAs can sign tax returns and prepare tax audits. |
Governing Body | There is no governing body for tax accountants. | The governing body for CPAs is the American Institute of Certified Public Accountants (AICPA). |
Salary | Tax accountants have a lower salary than CPAs. | When compared to tax accountants, CPAs earn 25% more. |
Tax Accountant vs. CPA FAQ
#1. How much do CPAs earn on average?
According to Glassdoor, the average salary for CPAs in the US is $84,562.
#2. How many tax accountants are CPAs?
All CPAs can be tax accountants, but no tax accountants can be CPAs due to the licensing requirements.
#3. What is better, a tax accountant or a CPA?
Even though a CPA is licensed and can be considered more knowledgeable, there is no definite answer to this question. Instead, you should hire the professional that suits your business better, which varies from company to company.
#4. Can you become a CPA without a degree?
No, you cannot become a CPA without a degree, as a degree is required by the American Institute of Certified Public Accountants (AICPA).
Final Thoughts
At the end of the day, although similar, tax accountants and CPAs are quite different in many fields.
Hopefully, this article has given you a better overview of these two professions, so now you can hire the most suitable one for your company. So, carefully compare the duties and responsibilities of each, see what you need, and make the right choice!
