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Difference Between a CPA and Accountant

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cpa or accountant adviserThe difference between a CPA and an accountant is a conversation that has come up often with business owners and individuals seeking out the right professional for their needs.

It is a great question and had us thinking about the proper answer to help you understand that there are many ways a professional in the industry plays a part in building a financial foundation for individuals and businesses.

From bookkeepers to accountants to CPA’s, they all play an important role in the financial function, yet offer a wide range of skills, experience and knowledge that can help or hinder your ability to grow and hit your business and personal financial goals.

These terms get interchanged often, but there are distinctions to be considered when hiring a CPA or accountant. For example, not all accountants become CPAs.  CPAs must sit and pass an extensive exam (4 parts with a 50-60% pass rate) to obtain licensing and attain a certain amount of higher education hours.  They must perform continuing education reported to their state board on an annual basis.

This doesn’t mean a CPA is always better than an accountant. We’ve worked with many accounting professionals and tax preparers over the years that were exceptional and truly understood accounting and taxes.  With that said, we want you to be informed of the difference, so you know which is right for your situation.

Does it Matter to Have a CPA?

CPAs can provide services that non-CPAs cannot. According to the AICPA, CPAs are some of the business world’s most trusted advisers. The designation enables them to provide audited financial statements and represent taxpayers before the IRS.

Comparatively, an accountant’s qualifications can range from little experience to highly qualified.  Determining the type of work and analysis that needs performed can be the first step in deciding if a bookkeeper, an accountant or CPA is needed.

Once the CPA designation is obtained, continuing education requirements must be completed to maintain the license.   CPAs must follow a strict set of ethical standards holding them to a higher standard than non-designated professionals.

Does Everyone Need a CPA?

Business and investing are team sports and there is a lot that goes into compliance whether you own a business or only file your individual taxes. Add to that life planning such as major events, putting kids through college, paying off debt, retirement strategies, estate planning and other important matters and you’ll quickly get overwhelmed trying handle these aspects alone or cost you by utilizing the wrong adviser.

CPAs aren’t just bean counters. They offer advice and guidance surrounding challenging situations as life happens. CPAs can be a part of your advisory team to help with tax planning, starting and growing a business, selling or buying a business, raising capital, connect you with other professionals, financial analysis, help navigate trust and estate matters, assist in audits, and provide assurance for financial statements to banks.

Bottom line is many individuals won’t need ongoing CPA services, but there will be times and/or complications in life that consulting with a CPA makes sense. You will typically know when sitting down and having a conversation with a CPA is the next step.

Why Hire a CPA?

Hiring a CPA provides you with proven technical skills and an expertise that you may not find in other professionals or accountants. You will feel confident knowing the CPA keeps up with current economic conditions and regulatory matters.  A good CPA will help consult on major decisions to help you determine the best approach by providing proper analysis and advice.

CPAs can compile, review or audit financial statements that are often required by banks, lenders and state or government regulators. CPAs can assist in obtaining and reviewing financing options and work with lenders to ensure you’re able to raise capital.

CPAs are experts at becoming experts and must be very resourceful. They offer troubleshooting advice to both businesses and individuals, by providing an additional set of eyes, knowledge, and experience to help navigate challenging issues.

The main role of a CPA is to provide solutions to problems and not just in the financial sense.  It’s not just about performing tasks and being reactive. Good CPAs are proactive in their approach and provide analysis and guidance along with the tasks that need to be performed.  This guidance can make big differences in the direction you take in your business or personal affairs.

Bottom Line…

Understanding the difference between an accountant and CPA can help you make the right decision for your business or personal affairs. A high-quality CPA can assist you in getting to the next level based on your goals. The more you utilize your team of professionals, the more apt you are to be successful.

Maybe you think you do not need a CPA and only need someone to handle ordinary accounting matters. However, there are situations when a CPA is the right choice for the job and will save you time and money. If you don’t know when it makes sense to hire a CPA, you can always sit down with one and have that conversation.

Schedule a free consultation and receive a free tax review with one of our CPAs at BGMF.

Tax Planning for Divorce

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Divorce Tax PlanningAre you going through a major life change such as divorce? Tax planning for divorce is a crucial step in ensuring you don’t cost yourself more money during and after the process.

The good news is you don’t have to deal with this and everything else going on alone. Our team is here to assist you during and after the process.

If you are getting a divorce, taxes are probably not highest on your list of concerns. Still, you should consider a number of tax-related issues.

Property Settlements

Dividing property in connection with a divorce generally has no immediate consequences for either spouse. However, if the spouse who receives property in the divorce settlement later sells it, there may be a gain to report for tax purposes. So, potential taxes should be a consideration in deciding which spouse will receive which property.

Note that a spouse who receives property in a divorce figures any gain on a subsequent sale of the property using the transferring spouse’s basis (e.g., cost), not the property’s value when it was received.

For example: Michelle receives 10 acres of unimproved land in her divorce settlement. Her ex-husband bought the land for $25,000. It’s now worth $100,000. If Michelle sells the land for $100,000, she will have to report a taxable gain of $75,000 (the difference between the $100,000 selling price and the $25,000 cost basis).

Personal Residence

If a divorcing couple sells their home while they are still married, they are entitled to exclude up to $500,000 of gain from their taxable income if otherwise eligible for the exclusion. If the ownership of the home is simply transferred to one spouse as part of the divorce settlement, there is no taxable gain or loss at the time of transfer. However, should that spouse later sell the house while he or she is unmarried, only a $250,000 exclusion would be available.

Retirement Benefits

A divorce settlement often determines how retirement plan benefits will be divided. However, an employer may distribute retirement plan benefits to a former spouse only after receiving a court-issued document that meets the requirements for a qualified domestic relations order (QDRO). The benefits are taxable to the former spouse who receives them pursuant to a QDRO.

Dependency Exemptions

The Tax Cuts and Jobs Act of 2017 suspended the deduction for dependency exemptions for 2018 through 2025. But after 2025, the deduction will apply (unless additional changes are made). While the spouse who has legal custody of a child is generally entitled to claim the dependency exemption, this tax advantage is negotiable and can change from year to year. The custodial spouse can waive his or her right to the exemption, allowing the noncustodial spouse to claim it.

Other Tax Benefits

Having a child or relative qualify as a dependent may impact other tax benefits. For example, there is a potential child tax credit of up to $2,000 annually for each qualifying dependent child under age 17 and $500 for each qualifying relative over 17 (i.e. your children in college).

Alimony vs. Child Support

Payments that qualify as alimony under the tax law are deductible by the paying spouse and are considered taxable income to the recipient spouse. Child support payments, on the other hand, are not deductible by the paying spouse and are not included in the recipient spouse’s income. The IRS characterizes payments that are linked to an event or date relating to a child — such as high school graduation or a 21st birthday — as child support rather than alimony.

Note that the tax treatment of alimony will be different for taxpayers who divorced after 2018. Under the Tax Cuts and Jobs Act of 2017, no deduction is available for alimony payments made under post-2018 divorce or separation agreements and recipients are not required to include the payments in income.

These are just some of the tax planning issues that could be important in a divorce situation. Be sure to consult our expert divorce tax planning advisors to discuss how these general rules pertaining to your personal situation.

What to Do When You Get an Audit Notification

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IRS Audit HelpYou’ve opened the mail and your heart sinks. You or your business just received an audit notification from the IRS.

BGMF CPAs deals with these letters due to a variety of reasons from a letter that indicates something was not reported on the tax return to a full-fledged, IRS agent in your office audit to review all records.

Keep reading to learn how to keep your cool and prepare for what happens next (and how we can assist you).

You may be surprised to learn that not every audit notification you receive will be legitimate. So, first, make sure you received an official audit notification. The Internal Revenue Service (IRS) will notify you either by letter or by a phone call followed by a letter. If you receive a call without the letter, please consider this potentially fraudulent.

The IRS does not notify taxpayers about audits through email or phone call only, so again if you do get an email or phone call saying you’ve been selected for an audit, it’s probably fraudulent. There continues to be new scams threatening taxpayers surrounding audits and other IRS matters. Do not respond or hang up and contact your CPA before providing any information.

If you’ve determined that you’re definitely getting audited, your next step is to learn what’s involved.

What Exactly Is an Audit?

According to the IRS, an audit is “a review/examination of an organization’s or individual’s accounts and financial information to ensure information is being reported correctly, according to the tax laws, to verify the amount of tax reported is substantially correct.”

That’s it. It’s an audit — not an arrest and not a trial — so don’t panic. Contrary to popular belief, an audit doesn’t automatically mean you made a mistake. Yes, an inconsistency can trigger an audit if there’s a discrepancy between what’s on a tax form and what you actually reported.

But the IRS may choose to audit a taxpayer based on random selection or a statistical formula. Also, an audit may be less intrusive than you feared. For example, it may be entirely through the mail, although in some cases, it may be at an office or the taxpayer’s home or place of business (or our firm’s office). And not all audits result in your owing money. In fact, your audit may lead to no changes at all.

Both businesses and individuals may be audited (even sole proprietorships), and there may be some differences in how they are handled. One thing that virtually all audits have in common, however, is access to records. The IRS is going to want to check some of your records, and maybe a lot of them. Did you deduct business expenses? Make some substantial charitable contributions? You’ll need to show the IRS some receipts. The good news is that in many cases the IRS accepts electronic records.

What Happens Next?

There is no typical length of time for an IRS audit, but if you have your records handy and cooperate fully and quickly, you increase your chances that it will be as brief and painless as possible. Ultimately, the IRS may determine that you owe more money. At this point, you can pay it or you can appeal. The audit doesn’t have to be the end of the road. There is a substantial appeal process and a long and expensive court trial may not even be necessary.

The important thing to remember is that you don’t have to go it alone! Our CPA firm can work with you throughout the audit process, including any appeals. The key factor is to call us as soon as you receive the notification about your audit. We’re ready to work through the details and help you gather any records you may need.

Winning Over a Larger Competitor

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Winning over larger competitorRunning a small business isn’t easy. You probably wouldn’t have it any other way. The ability to survive and thrive is a source of great pride for small business owners.

So when a competitor moves in — especially a big one — it can feel like battle lines have been drawn.

Competition is a good thing. That is why you see you multiple fast food restaurants on the same block. If you are set up properly you will be able to not only compete, but win with your business.

Don’t fear competition and realize that smaller can mean moving faster and more efficient, but you have to be set up for that.

Below are a few tips on how to win over a larger competitor. Our team can help you strategize to ensure you’re in the right position to win if competitors move in!

Sharpen Your Edge

Before you do anything, accept the fact that you can’t compete on the same level as a large national chain. But that doesn’t mean you can’t win the battle. Study what the competition does and how they do it. Then use that information to define — and sharpen — your company’s competitive edge.

You will need to know what your USP is and what your strengths are to succeed against competition.

A large competitor will almost certainly have lower prices and a deeper inventory. But you can connect with customers in ways the competition can’t. You can add value to every customer interaction by being attentive and providing expertise and personalized service.  Price should not be what you’re competing on.

Perhaps your biggest edge is your size. Being small means you can respond to market trends and customer requests more quickly. You can also change and adapt policies and procedures faster.  Larger companies move at a much slower pace in many cases.

Rally the Troops

You have another big advantage; you have an established customer base and you know what they need. Establish a timeline to reach out to your customers directly via snail mail or e-mail (or both) with special offers.

If you have a loyalty program, consider doubling rewards for a period of time that overlaps with the competition’s opening. Get feedback from customers and employees on areas of improvement or wants they would like to have.

Look for Advantages

Having a big competitor move in may have some unexpected benefits. The new company validates the need for what your business offers and may do a fair amount of advertising.

If your marketing budget allows, this could be a good time to do some strategic advertising of your own. Use technology and social media to continue to get the word out and build a following.

The competition also may create some unexpected opportunities in the future. The new company will change the dynamics of the marketplace, which may lead you to steer your business in a new direction.

Don’t get left behind. Contact us today to discover how we can help you keep your business on the right track. Don’t wait, give us a call today.

Use QuickBooks Online to Streamline Accounting

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quickbooks online assistanceIf you dread every minute of the time you spend on accounting, you should know how QuickBooks Online can change your outlook.

Our CPA firm is well versed in QuickBooks and moving more clients to the online version.

We have a great team of experts who can help set up and train your team to utilize  the online version to the fullest.  Our focus and goal is to make your accounting system streamlined so you can focus on running your business.

We also help you review the numbers and feel confident in where you stand at any given moment.

How long would it take you to determine:

  • What your total expenses for this quarter are?
  • Whether or not your business is profitable as of today?
  • How much you’ve sold every month this year?
  • Which invoices are overdue?

If you’re using QuickBooks Online, you can get answers to all those questions—and more—in the time it takes you to sign on to the website.

That’s not an exaggeration. The first thing QuickBooks Online displays is what’s called its Dashboard. This is the site’s home page, which contains an array of charts and account balances that provide a quick overview of your finances. Click on an element here—say, a checking account balance—and you’ll be able to drill down and see the details behind it (in this case, an online account register). Click on the Expense graph, and a transaction report opens.

Your First Hours with QBO

QuickBooks Online is not one-size-fits-all. Its setup tools help you customize it to meet your own company’s needs.

QuickBooks Online works like other online productivity applications you may have used. It uses toolbars and buttons for navigation, drop-down lists and blank fields for data entry, and clickable links to open new related screens to trigger actions. Which is to say, the site is easy to use once you understand its structure.

We can walk you through the early steps that are required, which involves tasks like: Using the provided setup tools to customize the site. Connecting QuickBooks Online to your bank and credit card company websites so you can work with transactions.

Creating records for your customers, vendors, and the products and services you sell (you’ll be able to add new ones as your business grows). Learning about QuickBooks Online’s pre-built reports. Familiarizing yourself with the site’s workflow. Making the transition from your current accounting system.

How You’ll Benefit

Once you’re comfortable using QuickBooks Online, you’ll discover what millions of small businesses have already learned, that the site helps you:

Get paid faster. You can sign up with a payment processor to accept credit cards and direct bank withdrawals, which can speed up your customers’ responses to invoices. You’ll also be able to accept payments when you’re out of the office on your mobile devices.

Minimize errors. Once you enter data, QuickBooks Online remembers it. No more duplicate data entry that can cause costly mistakes.

Find any detail in seconds. QuickBooks Online has powerful search tools that allow you to find what you’re looking for quickly.

Better service customers. Because your customer profiles include transaction histories, you’ll be able to deal with questions and problems quickly and accurately.

Bill time as well as invoice products. QuickBooks Online supports sales of time-based services with capable time-tracking tools.

Improve your customers’ and vendors’ perception of you. Your business associates will know that you’re using state-of-the-art technology by the forms you share and the customer service you provide.

Save money and time. It does take some time to make the transition to QuickBooks Online. But you’ll quickly make that up with the hours you’ll save on accounting tasks, and be able to concentrate on tasks that improve your bottom line.

Be prepared to grow. Because all of your financial data is organized and easily accessible, you’ll be able to quickly generate reports that help you plan for a more profitable future. Banks and investors will need some of these if you decide to seek financing.

Mobile Access

Although you may do the bulk of your accounting work on your desktop or laptop, you’ll have access to many of the site’s features on your smartphone. Your home page displays both an abbreviated version of your browser-based dashboard and a list of recent transactions.

You can view, edit, and build new customer, vendor, and product or service records. Snap a photo of a receipt to document an expense and look up or create invoices, estimates, and sales receipts. Record payments, view critical reports, and add notes. Of course, your mobile data is always synchronized with the site itself.

This also enables your CPA to login remotely and assist with questions or make adjustments instantly.

QuickBooks Online lets you do much of your accounting work when you’re away from the office with its mobile app.

Happy to Help

QuickBooks Online was designed for small businesspeople, not accountants.

But it includes features that are best used in conjunction with our consulting services, like advanced reports, payroll, and the Chart of Accounts. In fact, the site makes it easy for us to have access to your data so we have the ability to monitor and troubleshoot.

We’ve helped countless sole proprietors and small businesses move their accounting operations to QuickBooks Online, and we’ve seen the difference it’s made in their productivity as well as their attitude toward financial management. Contact us, and we’ll be happy to do the same for you.

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Still doing your accounting manually? You’re spending unnecessary hours and experiencing needless frustration. Talk to us about QuickBooks Online.

Did you know you can do much of your accounting work and accept customer payments on your smartphone? Let us introduce you to QuickBooks Online.

Are you often away from the office? QuickBooks Online lets you handle accounting tasks from anywhere there’s an internet connection. We can tell you how.

Does your manual accounting system make it hard to keep track of customers and inventory? QuickBooks Online can organize and manage both. Contact us today to learn how our team at BGMF can help you make your accounting and reporting more efficient.

Do This if Selling a Business

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selling a businessDo your plans for the future include selling your small business? For the best chance of a successful outcome, you’d be smart to start preparing for the sale well in advance.

For What It’s Worth

After you’ve built your business from the ground up, being objective about its value can be difficult. If you know what other companies like yours have sold for recently, that may give you a rough idea of what price your business might bring. For a clearer idea, consider having a professional business valuation done.

BGMF CPAs can provide guidance on valuing your business and can recommend resources to assist in the process so you maximize your gains (and minimize taxes) from the sale.

Give some thought, in a broad sense, to the type of buyer who would be ideal. Perhaps a key person who currently works for your company? A competitor? Someone who just wants to buy a good business and run it but isn’t a current employee or competitor? An investor who wants to make a profit but isn’t interested in the day-to-day operations of the company? The sales price you can realistically expect to receive will depend in part on the type of buyer you are targeting.

At this point, you’ll also want to think about your future participation in the business after it is sold. Consider the role you’d be willing and able to play, if any, during the transition to new ownership.

Make It Attractive

Before putting your company on the market, you’ll want to focus on its profitability. Taking steps to enhance the bottom line — even if it means paying more income taxes — may allow you to command a higher price for the business.

On the asset side, now is the time to identify any equipment, furniture, fixtures, or machinery that is no longer useful and consider selling or otherwise disposing of these items. That way, you’ll be able to present a leaner business to potential buyers.

It’s What You Keep

Selling your company for a fair price is important, but so is securing all available tax advantages. Will you be structuring the sale as an asset sale or will you be selling your company stock? Each has different tax implications. With smart planning, you’ll be in a better position not only to command top dollar for your company, but also to minimize taxes on the sale.

Our firm has been involved in the buy and sell side of businesses and can assist you in the process. Contact our firm today to schedule a time to discuss the process involved in buying or selling a business.