In the accounting world there are a lot of titles floating around that seem like they mean the same thing. While there are many similarities the titles actually indicate different levels of understanding of the accounting world.
Let’s start with the word bookkeeper. In general a bookkeeping does the tedious job of data entry. They typically do not have an accounting degree and cannot represent you before the IRS. Typically they understand your income and expenses very well but have been known to make the mistake of calling an advance from your line of credit income. If not caught by your tax preparer this will cause you to pay income tax on money that you borrowed.
An enrolled agent must either pass an IRS exam to show that they understand tax law or have 5 years experience working at the IRS. They must have 16 hours of continuing education each year with 2 of those hours being in ethics and they can represent you before the IRS. They typically take your Profit & Loss Statement and prepare a tax return from it. They know tax law very well but may be a little weak in accounting skills.
A CPA must have a bachelors degree from an accredited university with a minimum number of hours in accounting classes. They must pass the Certified Public Accounting Exam which has 4 different sections; law, accounting, tax & audit. They must have 40 hours of continuing professional education each year and every 2 years, 4 of those hours must be in ethics. They can perform audits and prepare tax returns and they can represent you before the IRS. In theory a CPA should be able to process your bookkeeping, analyze your financial statements and prepare a tax return. Sadly that is not the case. Sometimes a CPA will specialize in one area. Take a CPA at a national firm, they may specialize in research & development in the tax department and never prepare a tax return. I know some CPAs that only prepare tax returns but don’t understand how to tie out a Balance Sheet.
As you can see Bookkeeper, Enrolled Agent & CPA do not have the same skill level. Sometimes the skill level is so narrow on either end of the spectrum that a small business owner will not benefit. You could have a bookkeeper that only does data entry, or a CPA that only knows research & development, and what you really wanted was one person to do the bookkeeping and tie out the balance sheet and another person to prepare the tax return. Some small business owners want to do the data entry themselves and hire someone to tie out the balance sheet and prepare the tax return. The key to it all is understanding what it is you want from your bookkeeper, enrolled agent or CPA and then finding one that does it.