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Differences Between Bookkeepers, Accountants, Certified Public Accountant (CPAs), and Enrolled Agents (EA)

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taxaccounting, bookkeeping, tax services

 

You may have heard about the terms bookkeeper, accountant and Certified Public Accountant (CPA), but you may not have heard about Enrolled Agents (EAs). You may also have noticed that these terms often get used interchangeably. Yet, there are some significant differences between them.

1. Bookkeepers

Traditional bookkeepers don’t need to have a college degree. Their main tasks revolve around day-to-day recording of business transactions and monthly accounting cycles. Their duties consist in entering transactions into bookkeeping journals and preparing monthly reports.

In some cases, bookkeepers are also responsible for Accounts Payable or Accounts Receivable. Some of their other responsibilities may include payroll, collection activities and bank deposits.

More experienced or certified bookkeepers grow in their careers to become accountants. In many instances, bookkeepers may work closely with accountants. In terms of salaries, bookkeepers may be less costly to a business than accountants or Certified Public Accountant (CPA).

The Enrolled Agent (EA) will make use of the bookkeepers records to prepare the business’ taxes.

2. Accountants

Unlike bookkeepers, most accountants have college degrees in accounting or 120 to 150 college credits. Their duties generally involve more complex transactions, and adjustments to a company’s books. These include computing the allowance for accounts receivable or depreciation. They are also more likely to work for larger companies.

Bookkeepers record financial transactions. Accountants interpret and classify financial data.

They may also prepare financial statements and perform tax planning activities.

3. Certified Public Accountants (CPA)

Besides a college degree, CPAs also have an extra 30 hours of college coursework. They take a standardized exam to earn their state licenses.

CPAs can handle a variety of complex tasks for businesses and individuals. They perform activities such as tax preparation, financial planning, and investment planning. They may also be in charge of preparing and maintaining financial statements. They can also be involved in audits.

Many careers are available to CPAs in public or corporate accounting. Many CPAs get promoted to high-level executive positions as controllers, for instance. They also give advice in areas like internal and external auditing and forensic accounting.

4. Enrolled Agents (EA)

Enrolled Agent a federally authorized tax professional, who has technical expertise in the field of taxation and is empowered by the US Department of the Treasury to represent taxpayers before all administrative levels — examination, collection and appeals — of the IRS.

Like the CPA they must pass a 3-part exam, all based on tax and tax laws. EAs must complete 72 hours of continuing education every 3 years. They also adhere to strict ethical standards.

When Should Bookkeepers, Accountants, CPAs and/or EAs be hired?

Bookkeepers perform technical transactions requiring less proficiency and training than accountants. The more complex the operations or the organization is, the more important it is to hire an accountant with more expertise.

Accountants or CPAs may perform more technical accounting tasks requiring more expertise. Companies also hire them to provide managerial advice.

Enrolled Agents (EAs) are used for their tax expertise and their ability to represent clients before the IRS.

Are you wondering about the differences between bookkeepers, accountants, CPAs, and EAs? Contact us for a free consultation at (561) 842-1304.

 

Sources:

“The Differences Between Bookkeepers Vs. Accountants Vs. CPAs.” The Finance Base. Accessed August 26, 2017. http://thefinancebase.com/differences-between-bookkeepers-vs-accountants-vs-cpas-4980.html.

Staff, Investopedia. “Certified Public Accountant – CPA.” Investopedia. November 19, 2003. Accessed August 26, 2017. http://www.investopedia.com/terms/c/cpa.asp.

CPA VS Accountant. Accessed August 26, 2017. http://www.accountingedu.org/cpa-vs-accountant.html.

“What’s the Difference Between a Bookkeeper and an Accountant?” QuickBooks. May 19, 2017. Accessed August 26, 2017. https://quickbooks.intuit.com/r/bookkeeping/whats-the-difference-between-a-bookkeeper-and-an-accountant/.

 

The IRS Responds to Those Affected by Hurricane Irma

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Upcoming Deadlines Extended for Those Affected by Hurricane Irma

The upcoming deadlines for tax returns and tax payments have been extended until January 31, 2018. This includes the September 15, 2017 deadlines for tax payments and tax returns that are on extension; as well as, the October 15, 2017 individual extensions and November 15, 2017 non-profit extensions.

“WASHINGTON –– Hurricane Irma victims in parts of Florida and elsewhere have until Jan. 31, 2018, to file certain individual and business tax returns and make certain tax payments, the Internal Revenue Service announced today.

Today’s relief parallels that granted last month to victims of Hurricane Harvey. This includes an additional filing extension for taxpayers with valid extensions that run out on Oct. 16, and businesses with extensions that run out on Sept. 15.

“This has been a devastating storm for the Southeastern part of the country, and the IRS will move quickly to provide tax relief for victims, just as we did following Hurricane Harvey,” said IRS Commissioner John Koskinen. “The IRS will continue to closely monitor the storm’s aftermath, and we anticipate providing additional relief for other affected areas in the near future.”

The IRS is offering this relief to any area designated by the Federal Emergency Management Agency (FEMA), as qualifying for individual assistance. Parts of Florida, Puerto Rico and the Virgin Islands are currently eligible, but taxpayers in localities added later to the disaster area, including those in other states, will automatically receive the same filing and payment relief. The current list of eligible localities is always available on the disaster relief page on IRS.gov.

The tax relief postpones various tax filing and payment deadlines that occurred starting on Sept. 4, 2017 in Florida and Sept. 5, 2017 in Puerto Rico and the Virgin Islands. As a result, affected individuals and businesses will have until Jan. 31, 2018, to file returns and pay any taxes that were originally due during this period.

This includes the Sept. 15, 2017 and Jan. 16, 2018 deadlines for making quarterly estimated tax payments. For individual tax filers, it also includes 2016 income tax returns that received a tax-filing extension until Oct. 16, 2017. The IRS noted, however, that because tax payments related to these 2016 returns were originally due on April 18, 2017, those payments are not eligible for this relief.

A variety of business tax deadlines are also affected including the Oct. 31 deadline for quarterly payroll and excise tax returns. Businesses with extensions also have the additional time including, among others, calendar-year partnerships whose 2016 extensions run out on Sept. 15, 2017 and calendar-year tax-exempt organizations   whose 2016 extensions run out on Nov. 15, 2017. The disaster relief page has details on other returns, payments and tax-related actions qualifying for the additional time.

In addition, the IRS is waiving late-deposit penalties for federal payroll and excise tax deposits normally due during the first 15 days of the disaster period. Check out the disaster relief page for the time periods that apply to each jurisdiction.

The IRS automatically provides filing and penalty relief to any taxpayer with an IRS address of record located in the disaster area. Thus, taxpayers need not contact the IRS to get this relief. However, if an affected taxpayer receives a late filing or late payment penalty notice from the IRS that has an original or extended filing, payment or deposit due date falling within the postponement period, the taxpayer should call the number on the notice to have the penalty abated.

In addition, the IRS will work with any taxpayer who lives outside the disaster area but whose records necessary to meet a deadline occurring during the postponement period are located in the affected area. Taxpayers qualifying for relief who live outside the disaster area need to contact the IRS at 866-562-5227. This also includes workers assisting the relief activities who are affiliated with a recognized government or philanthropic organization.”

For Those Who Need Immediate Monetary Relief.

The IRS has announced that those in affected disaster areas have the option to amend their 2016 tax return and claim the damages on that return to get funds now instead of waiting for the 2017 return.

“Individuals and businesses who suffered uninsured or unreimbursed disaster-related losses can choose to claim them on either the return for the year the loss occurred (in this instance, the 2017 return normally filed next year), or the return for the prior year (2016). See Publication 547 for details.

The tax relief is part of a coordinated federal response to the damage caused by severe storms and flooding and is based on local damage assessments by FEMA. For information on disaster recovery, visit disasterassistance.gov.

For information on government-wide efforts related to Hurricane Irma, visit www.USA.gov/hurricane-irma.”

 

Quoted items are direct copy/paste from emails received by the IRS.

8 IRS Audit RED FLAGS you MUST avoid when preparing your taxes

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8 IRS Audit RED FLAGS you MUST avoid when preparing your taxes
Filing an income tax report is like walking on egg shells, do not be swayed by audit baits that will send the IRS knocking straight on your door. While the agency is reportedly having cuts in their budget, which would likely translate to fewer audits, that does not mean they are letting their guard down. 

Now let’s walk through standard IRS tax filing errors and find out how you can steer away from committing the same mistakes.

1. Declare ALL of your income.

IRS does not rely on your honesty, according to the National Association of Enrolled Agents (NAEA), it uses an automated form-matching program that detects discrepancies between what you report and what is in their database.

Copies of form W-2 for the wages, as well as 1099s for interest, dividends and capital gains filed by independent contractors and freelancers,  are also sent to the IRS. Always reflect these figures on your federal tax return or any discrepancies will trigger correspondence audit.


2. Don’t declare losses for extended periods, unless you can prove it.

Nobody is running a business for charity. It is understandable that new ventures need to recover the operation costs for a year or so before beginning to generate projected profits, and the IRS acknowledges this, but over declaring losses for an extended period will often sound the alarm for an IRS audit.

IRS tax attorney Garrett Gregory of Addison, Texas said: “report losses for three or more years and the agency will start to suspect ‘hobby lost’ cases” he said: “often calls for field audits which are in-person and more onerous than a correspondence audit.”

Be ready and keep records of your business expenses, document everything to prove you have a real business.

“You want to prove that you ‘breathed it, ate it, slept it, and drank it,’” Gregory added.


3. Anything Weird – Explain it.

Anything that looks off and questionable is among the IRS first red flags. Be the best judge, anticipate which of the entries would likely call for extra clarification, and provide it.

NAEA said insufficient net income, for example, warrants explanation and would require disclosure statement detailing how you managed to pull yourself off, either through savings, loans or credit cards.


4. Home Office Deduction Triggers.

Never report deductions for both office and home rental. Typically, your office is in one place, if not then explain it.

NAEA suggests that if your rental expense is for a business storage unit or equipment, it should be labeled property as ‘storage rental’ or ‘equipment rental.’

 

5. Report ALL Sales Incurred.

Bear in mind, the IRS has complete access to all necessary files and has programs that ultimately leave you no room to hide, either intentional or not, don’t leave anything out.

When you sell your home, the title company will send the IRS a 1099-S form, recording the proceeds from the sale. Even if the capital gains on the sale fall below the tax-exempt limits, it is still recommended to report the information on your return.

The same applies to the sale of mutual funds. Enrolled Agent Stephen DeFilippis of Wheaton, III said: “that in particular cases like selling a mutual fund bought before 2011 outside of tax-advantaged retirement account and reinvesting this in another mutual fund, must be reported or the IRS will assume the total proceeds from the sale are all taxable gains.”


6. Include Your Overseas Money.

If you think the IRS audit cannot sniff this, you are wrong. Under the new Foreign Account Tax Compliance Act (FATCA) foreign institutions will soon be sending this information to the IRS like any other bank or brokerage would in the United States.

If you fail to declare this income, penalties and back taxes will soon be crawling on your back.

 

7. Watch out for Mortgage Interest Deductions.

DeFilipis said: “when you co-own a house with your spouse, the lender sends you and IRS Form 1098, which records your mortgage interest during the year. However, often, this record also shows the social security numbers, should the person die, and the surviving partner tries to claim the mortgage interest deduction, it is already flagged.”

These tax audit red flags may come in handy; the key is to go over this carefully and declare everything, or better yet hire professional accountants in West Palm Beach to do the job for you.

For more information, please contact us.

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A Basic Tax Guide for Freelancers

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IRS tax return, tax services, tax accounting

Independent contractors or freelancers are solely responsible for filing their Income Tax returns as well as ensuring that the Internal Revenue Service (IRS) receives the right information, regardless of the amount you earn. This is a serious matter, and you have to handle accordingly.

If you are a newbie, here’s some old hand advice on how you can effectively manage your tax account.

1. Keep Your Own Record.

As an independent player, you will be issued a Form 1099 at the end of the year, keep your record using spreadsheets, or better yet get small business accounting software like QuickBooks to make it easier to track.

Bear in mind the expert advice, that relying solely on 1099s to tell you how much money you have earned is too risky. Some clients miss payments and make mistakes in calculations, filing your record is the smartest way to avoid errors.

2. Don’t Attempt to Hide Anything.

Trying to make cuts on Freelancers Taxes is a no-no. Everybody sends copies of his or her 1099 to the IRS, so if you drop one out, the IRS system will undoubtedly detect the discrepancy. Although we know some clients do fail in record keeping, it is too risky, always be on the safe side.

3. Use Separate Business Accounts.

To quickly glean through independent contractors’ tax deductions, especially the newbies, simplify your records by starting off with a separate business bank account. This way, all of your personal spending will not get mixed up, and having different bank statements for your business makes it easier to backup the information on your tax return.

4. Expect Mandatory Self-Employment Tax.

On top of the regular income tax rate, independent contractors should expect mandatory self-employment tax designed to cover social security and Medicare concerns that would normally be withheld by a traditional employer.

5. Identify Your Deductible Expenses.

When it comes to IRS rules on deductions, it must be both reasonable and necessary.  Take for example the equipment you need and travel expenses; as long as they are incurred as an indirect result of your freelance work.

One good thing with independent contractors’ tax deductions is it be can used to save for the future. Consult with a financial planner or a retirement specialist to find out how you can fund your retirement without the 401k or pension benefits a regular job might provide. There are many options: IRAs, Roth IRAs, investments, etc.

Get Professional Help.

Filing your taxes can be a daunting experience, especially if you have not been keeping records, there’s a lot to look into, and management is an entirely different thing to accounting. Why not get some professional help from The Balance Sheet Accountants? They not only take charge of your tax concerns but can help you analyze your financial standing with the tools that they use and experience they bring to your company.

Call us at (561) 842-1304 for more information on how we can help.

 

2017 Standard Mileage Rates for Business, Medical and Moving Announced

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The Internal Revenue Service issued the 2017 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Beginning on Jan. 1, 2017, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

  • 53.5 cents per mile for business miles driven, down from 54 cents for 2016
  • 17 cents per mile driven for medical or moving purposes, down from 19 cents for 2016
  • 14 cents per mile driven in service of charitable organizations

IRS Announces New Due Date, Filing Extensions, & Penalties for Form W-2

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According to the 2016 General Instructions for Forms W-2 and W-3 published by the IRS:

  • New Due Date for Forms W-2 — January 31, 2017 is now the due date for filing 2016 Forms W-2 and W-3 with the SSA, whether filing using paper forms or electronically. (Forms W-2AS, W-2CM, W-2GU, W-2VI, and W-3SS are also included.)
  • Extensions Not Automatic — Extensions of time to file Form W-2 with the SSA are no longer automatic. For filings due on or after January 1, 2017, one 30-day extension may be requested. However, the IRS will only grant the extension in extraordinary circumstances or catastrophe.
  • Higher Penalty Amounts — Higher penalty amounts apply to returns required to be filed after December 31, 2015 and are indexed for inflation.

More detailed information is available at https://www.irs.gov/pub/irs-pdf/iw2w3.pdf.

IRS April 18th Late Notice – ACTION REQUIRED

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The IRS has begun issuing late notices for tax deposits received April 18, 2016 as being late.  This is because April 15, 2016 was a District of Columbia Holiday and their computer system was not properly updated to reflect this.

IF YOU RECEIVE A NOTICE: Whether a penalty is assessed or not, you need to contact your accountant immediately to clear this from your IRS records.

Protect Retirement Funds from IRA Penalties

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IRSIRA Financial Group, the leading provider of self directed IRA LLC solutions announces the establishment of its Prohibited Transaction Protection Services. IRA Financial Group’s Prohibited Transaction Protection Services is focused on isolating IRA assets into special purpose limited liability companies (“LLCs”) so that the LLC only includes the IRA assets involved in the transaction in question.

In general, the penalty under Internal Revenue Code Section 4975 generally starts out at 15% for most types of retirement plans; however, the penalty is harsher for self-directed IRAs. “Because the IRS penalties for engaging in an IRA prohibited transaction is so extensive, IRA Financial Group’s Prohibited Transaction Protection Services is designed to offer a level of protection to our retirement investors, “ stated Adam Bergman, a tax attorney with the IRA Financial Group.

In general, if the IRA holder (IRA owner) or IRA beneficiary engages in a transaction that violates the prohibited transaction rules set forth under Internal Revenue Code Section 4975, the individual’s IRA would lose its tax exempt status and the entire fair market value of the IRA would be treated as taxable distribution, subject to ordinary income tax. In addition, the IRA holder or beneficiary would be subject to a 15% penalty as well as a 10% early distribution penalty if the IRA holder or beneficiary is under the age of 591/2.

With IRA Financial Group’s Prohibited Transaction Protection Services, a self-directed IRA investor would establish a special purpose LLC wholly owned by their IRA. The special purpose LLC would then invest certain IRA assets into specific investments. For additional IRA investments, a separate IRA owned LLC would be established to make the additional investments. Because a prohibited transaction results in the disqualification of the entire IRA, segregation of the IRA in a separate LLC to include only the assets involved in the transaction in question will preserve the qualified status of the other assets in the IRA if the transaction is deemed an IRS prohibited transaction. “We are excited to offer our self-directed IRA clients with a strategy to help insulate the IRA assets against a prohibited transaction, “ stated Mr. Bergman.

The IRA Financial Group was founded by a group of top law firm tax and ERISA lawyers who have worked at some of the largest law firms in the United States, such as White & Case LLP, Dewey & LeBoeuf LLP, and Thelen LLP.

IRA Financial Group is the market’s leading provider of self-directed solo 401(k) plans. IRA Financial Group has helped thousands of clients take back control over their retirement funds while gaining the ability to invest in almost any type of investment, including real estate without custodian consent.

To learn more about the IRA Financial Group please visit our website at http://www.irafinancialgroup.com or call 800-472-0646.