Accountant vs Bookkeeper vs Enrolled Agent vs CPA: Who Do You Need?

Do you need someone to help you crunch the numbers for your business? What’s the difference between an accountant, bookkeeper, EA, and CPA? Keep reading to find out.

Table of Contents

This post is provided for general information only. Please confirm the details and circumstances of your unique situation with your tax accountant or other appropriate advisor before taking action.

Bookkeeper

A bookkeeper is literally someone who keeps the books. Back in the old days, all the money a business received and spent would be written down in a book. That’s mostly done by computer now, but the concept is still the same.

A bookkeeper enters all of your transactions into your bookkeeping and accounting software or makes sure any automated tracking you have is working correctly. Bookkeepers may also send invoices, receive payments, pay your bills, or do similar routine tasks. In smaller businesses, bookkeepers may also take on additional customer service, managerial, or administrative roles.

Depending on the job, a bookkeeper may only need a high school diploma and may be an entry-level position. Of course, if you want to hire a bookkeeper who will take on more responsibility, you will usually choose someone with more education and experience.

Accountant

The line between junior accountants and bookkeepers can get blurry in small to mid-sized businesses. Generally, bookkeepers will be more geared towards day-to-day data entry, while accountants will do less data entry and more making sure the business is following the rules, managing cash flow, creating financial reports, and making recommendations to managers or the business owners. For public companies, accountants may also assist with SEC filings or audits.

In some states, “accountant” is a protected title that can only be used by a licensed CPA. That doesn’t mean all accounting tasks are performed by CPAs in those states. It just means that bookkeeping, financial reporting, internal auditing, financial statement preparation, and similar work will fall under a different job title.

Accountants generally have a four-year degree in accounting, finance, or business. However, some may be promoted within a company and not have that education. Accounting roles may range from entry-level clerk positions all the way up to the Chief Financial Officer.

CPA

CPA stands for certified public accountant. Certified means licensed by the state. Public means working for a public accounting firm rather than inside of a company. However, a CPA who goes to work for a company can still maintain their CPA title.

The typical requirements for a CPA are:

  • Have five years of accounting and business education.
  • Pass CPA exams.
  • Have one year of experience in a public accounting firm.
  • Take continuing education courses.

Note that the one year of experience rule is relatively new (2008). In the past, many financial planners, company accountants, and similar professionals could become CPAs by meeting the first two requirements. Today, the work experience must be in a CPA firm and is often in audits or obscure corporate accounting issues that aren’t relevant to SMBs. This means both that a CPA may not necessarily have expertise in the right area and that financial professionals working in areas that were historically filled by CPAs may no longer be CPAs.

EA

EA stands for Enrolled Agent. Enrollment is through the IRS after passing a series of exams and meeting continuing education requirements. Enrolled Agents can represent clients in all matters before the IRS including tax planning, preparation, and resolution.

EAs are tax specialists who may or may not have expertise in other business areas.

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