When you are seeking to hire someone to assist with your accounting records, prepare your taxes, or provide assistance dealing with an audit for cannabis excise, cultivation of sales tax what criteria should you use in the process?
In order to answer that question, we need to start with some definitions. In California, the magic letters are “CPA or PA”. If a person has those letters after their name, it means that they are licensed by the State of California, have a minimum of a bachelor’s degree, and very likely a graduate degree, have passed a rigorous exam, an ethics exam and meet specified criteria. If have a “D license” that is the base standard, but they are not permitted to perform audits. If they have additional experience and an “A license” then they can perform an audit.
If they are not a “CPA or PA”, in the case of an Enrolled Agent “EA” they may have passed an exam or worked for the IRS but they have absolutely no requirements with respect to education or experience. Interestingly, without thirty hours of college-level accounting or a CPA certificate, the IRS will NOT hire them to be a Revenue Agent. The only positions open to an EA at the IRS with the thirty hours or accounting or a CPA certificate are mail clerk, file clerk, and custodian. Learn more here.
California does recognize a lower level credential referred to as CTEC Registered Preparer A CTEC is required to ake a 60-hour qualifying education course from a CTEC approved provider within the past 18 months.
Purchase a $5,000 tax preparer bond from an insurance/surety agent.
Obtain a Preparer Tax Identification Number (PTIN) from the Internal Revenue Service (IRS).
Register and submit the $33 registration fee online.
The designations “accountant”, “cloud accountant”, cannabis accountant", “Xero Certified”, or any flavor of “QuickBooks Advisor” is meaningless. The software vendor certifications relate to proficiency with software and have absolutely NOTHING to do with competence in performing accounting tasks or taxes, period, end of discussion..
The California Accountancy Act, and Sec. 5051 states:
Except as provided in Sections 5052 and 5053, a person shall be deemed to be engaged in the practice of public accountancy within the meaning and intent of this chapter if he or she does any of the following:
(a) Holds himself or herself out to the public in any manner as one skilled in the knowledge, science, and practice of accounting, and as qualified and ready to render professional service therein as a public accountant for compensation.
(b) Maintains an office for the transaction of business as a public accountant.
© Offers to prospective clients to perform for compensation, or who does perform on behalf of clients for compensation, professional services that involve or require an audit, examination, verification, investigation, certification, presentation, or review of financial transactions and accounting records.
(d) Prepares or certifies for clients reports on audits or examinations of books or records of account, balance sheets, and other financial, accounting and related schedules, exhibits, statements, or reports that are to be used for publication, for the purpose of obtaining credit, for filing with a court of law or with any governmental agency, or for any other purpose.
(e) In general or as an incident to that work, renders professional services to clients for compensation in any or all matters relating to accounting procedure and to the recording, presentation, or certification of financial information or data.
(f)makes books, makes trial balances or prepares statements, makes audits, or prepares reports, all as a part of bookkeeping operations for clients.
(g) Prepares or signs, as the tax preparer, tax returns for clients.
(h) Prepares personal financial or investment plans or provides to clients products or services of others in the implementation of personal financial or investment plans.*
** (i) Provides management consulting services to clients***.
The activities set forth in subdivisions (f) to (i), inclusive, are “public accountancy” only when performed by a certified public accountant or public accountant, as defined in this chapter.
A person is not engaged in the practice of public accountancy if the only services he or she engages in are those defined by subdivisions (f) to (i), inclusive, and he or she does not hold himself or herself out, solicit, or advertise for clients using the certified public accountant or public accountant designation.
Wow, that is a lot of words. So I am going to come back to what that means. Let’s just focus on the point that the reason you should care about the difference is that while there a numerous “bookkeepers”, generic accountants, cloud accountants, and cannabis accountants, NONE OF THEM HAVE GONE THROUGH THE REQUIREMENTS needed to be a CPA. If you are going to spend a substantial amount of money to hire someone, you are entitled to understand what you are paying for. That isn’t a swipe at any of those indi,viduals who may provide valuable services. However if they refer to themselves as certified, expert, or performing audits, certification or just about any other service with respect to financial statement, they are very likel breaking the law.