Bookkeeper, CPA or tax preparer: which one do you need?

The three titles get used as if they meant the same thing. They don't. One describes a job, one is a license a state issues, and one is a role anyone paid to file returns steps into. Hiring the wrong one usually doesn't show up until tax season or an IRS letter.

Bookkeeper: a job, not a license

A bookkeeper records your transactions, keeps the ledger straight, reconciles your accounts and produces reports from the books. The Bureau of Labor Statistics lists the work as entering financial transactions into software, recording payments, checking figures for accuracy and producing reports such as balance sheets and income statements.

There's no general license to be a bookkeeper. The BLS says certification is "not usually required", although some bookkeepers earn one to show their competency. A bookkeeping certificate is a private credential. It isn't a CPA license, and the title alone gives no right to represent you in front of the IRS.

What that means for you: plenty of excellent bookkeepers hold no license at all. Judge them on what they document and on how they run your books month to month, not on letters after their name.

CPA: a license a state board issues

A certified public accountant is licensed by a state board of accountancy, or by the District of Columbia or a US territory. The IRS gives CPAs unlimited representation rights, which means a CPA can deal with the IRS on your behalf on any matter, including audits, collections and appeals.

Many CPA firms also do bookkeeping. You're paying for the license when you need what it covers: representation before the IRS, or tax work you'd rather not leave to someone without a credential.

You can check a CPA license yourself. The boards in each of our launch states run a public lookup that shows whether a license is active, and our profiles record that check wherever a board's search lets us run it. A license held by one person at a firm is that person's license. It doesn't make every member of staff a CPA.

Enrolled agent: a federal tax credential

An enrolled agent is licensed by the IRS itself, not by a state. Enrolled agents also have unlimited representation rights before the IRS. It's a tax credential, so if your main worry is tax filings and IRS letters, an enrolled agent can cover that without being a CPA.

Tax preparer: a role anyone paid can take on

Anyone who prepares or helps prepare federal tax returns for pay must hold a PTIN, a preparer tax identification number from the IRS. That applies to CPAs and enrolled agents who prepare returns too. A PTIN on its own is an ID number, not a qualification.

The difference shows up when something goes wrong. The IRS says preparers with only a PTIN "have no authority to represent clients before the IRS". Preparers in its voluntary Annual Filing Season Program get limited rights: they can represent clients only for returns they prepared and signed, and only before certain IRS staff.

Which one to hire

• You need clean monthly books and reports: a bookkeeper, licensed or not, who documents the work.
• You're behind on your books: a bookkeeper or firm that says plainly it does catch-up work.
• You need tax returns filed: a preparer with a PTIN, and ideally a CPA or enrolled agent if your situation is complicated.
• You've had an IRS letter, or expect an audit: a CPA or an enrolled agent, because they can represent you.

Plenty of firms do more than one of these. Ask which person will do each part, and check any license on the state board's own search before you rely on it.