What's the difference between a CPA, an EA, and a tax preparer?

A CPA (Certified Public Accountant) is licensed by the state after passing the CPA exam and meeting education and experience requirements. An EA (Enrolled Agent) is federally licensed by the IRS after passing a comprehensive exam — they specialize in tax representation and are strong for tax planning and audit work. A tax preparer is an unlicensed designation — anyone can call themselves a tax preparer. For a business with meaningful complexity, CPA or EA is the right credential; an unlicensed preparer is a risk.

How do I verify a CPA's license?

Every state has a CPA license lookup database. For California, check with the California Board of Accountancy (dca.ca.gov/cba). A licensed CPA should be listed with an active status. Be skeptical of anyone who uses CPA credentials but isn't listed — the designation is legally protected in all states and using it without a license is a violation.

Should my CPA also be my financial advisor?

Generally no — they're different disciplines. CPAs are trained in tax compliance, reporting, and planning. Financial advisors (CFPs, RIAs) specialize in investment management, asset allocation, and financial planning. The most important thing is that they communicate with each other — decisions about Roth conversions, capital gain timing, and retirement plan contributions need input from both. A good CPA actively coordinates with your advisor on these decisions.

How often should I be hearing from my CPA?

At minimum: once in Q3 or early Q4 to review the year-to-date and identify year-end planning opportunities; once when filing; and responsiveness when you have questions. A CPA who only surfaces at tax time isn't doing proactive planning. For higher-revenue businesses, quarterly check-ins are common and worth paying for.

What should I bring to my first CPA meeting?

Prior year's tax returns (personal and business), year-to-date profit and loss statement, payroll summary if you have employees, recent bank and brokerage statements, any documents for significant transactions (asset purchases, sales, new loans), and a list of major changes during the year (new employees, new service lines, vehicles, home office changes). The more organized you are, the less time you pay for your CPA to reconstruct the picture.

Tax planning

How to Choose a CPA for Your Business: What to Look For, What to Ask, and Red Flags to Avoid

Not all CPAs are the same, and the wrong fit costs more than their fee. Here's how to evaluate a CPA for a growing business — what specialization matters, what questions surface the right information, and why 'files my return' is the minimum bar, not the goal.

Written by Matt Reese, CPA · 6 min read · Published April 2026·Share on LinkedIn

Key Takeaways

A CPA who only files returns is a necessary but insufficient baseline. The right CPA reviews your situation proactively — flagging salary adjustments, estimated tax changes, and planning opportunities before year-end, not after.
Match the CPA's specialization to your situation. A CPA who primarily does individual returns may not know S-corp reasonable compensation, California PTET elections, or defined benefit plans. Ask specifically about your situation.
Verify credentials: CPA license (searchable through state board), not just 'accountant' or 'tax preparer.' Enrolled Agents (EAs) are federally licensed and strong for pure tax work, but CPAs have broader financial preparation requirements.
Budget range for a small business CPA: $1,500–$5,000/year for an S-corp return + personal return combination is typical for a well-run small business. Prices significantly below this often reflect volume mills, not proactive service.

Filing a return vs proactive tax planning

Many business owners discover their CPA gap only at a painful moment — typically when a large tax bill arrives that could have been reduced, or when they learn that a planning opportunity they missed (a cash balance plan deadline, an S-corp election timing window) can’t be undone retroactively.

The distinction between a filing CPA and a planning CPA is real:

A filing CPA collects your documents, prepares an accurate return, and files it. They do what you ask, execute correctly, and charge accordingly. For some owners, this is the right level of service.
A planning CPA reviews your situation throughout the year, calls you in October with recommendations, flags issues before year-end, and coordinates with your financial advisor on decisions that cross the planning/tax boundary.

The right question isn’t “Does this CPA file accurate returns?” — that’s the minimum standard. It’s “Does this CPA make decisions better by being involved before they’re made?”

Questions to ask in a CPA interview

Question	What a good answer looks like
How many S-corp clients do you work with?	Dozens or more. They should be comfortable with reasonable comp analysis, PTET elections, and quarterly payroll for owner-employees.
How do you typically handle the salary/distribution question for S-corp owners?	Should describe a process: reviewing industry comps, discussing with the client, documenting the analysis. 'We set it to $X because that's what we always do' is a red flag.
When do you typically contact clients during the year — other than at filing time?	Should mention Q3 or Q4 review proactively. 'Only when you contact me' is a filing firm, not a planning firm.
Do you work with financial advisors for your business owner clients?	Should be familiar with coordinating on retirement plan contributions, gain timing, and distribution planning. Ideally has established relationships.
What do you know about [specific issue relevant to me — PTET, defined benefit plan, QSBS]?	Fluency on your specific situation. If they need to 'look into it,' it's not a current area of expertise.
What's included in your annual fee? What triggers additional charges?	Should be clear on scope: S-corp return, personal return, what's included. Hourly billing with no budget is a sign of poor communication practices.

Red flags to watch for

Red flag	Why it matters
Sets S-corp salary 'low as possible' without analysis	Exposes you to IRS audit and back payroll taxes. Reasonable comp needs to be defensible.
Never mentions planning opportunities proactively	If the only time you hear about a strategy is when you ask, you're flying blind on opportunities with hard deadlines.
Never files or misses deadlines frequently	Disorganization in filing deadlines is a sign of office management problems. A late K-1 delays your personal return.
Can't explain a recommendation clearly	If they can't explain why they're recommending something in plain English, you can't evaluate it. Jargon shouldn't replace explanation.
Not a licensed CPA (unlicensed preparer)	No professional discipline, no insurance, and no continuing education requirement. High risk, especially for complex business situations.
Never asks about your financial advisor or other advisors	Siloed thinking. A good CPA asks about the full picture — retirement accounts, investment portfolio, life insurance, to see what decisions have cross-discipline implications.
Discourages questions about the bill	Transparency about fees is basic. A CPA who won't discuss scope or billing is managing you rather than working with you.

Types of CPA firms and who they serve

Firm type	Who it serves well	Who it doesn't
Big 4 / national firm	Large corporations, public companies, complex M&A	Small/mid-size business owners — too expensive, too generalized, no relationship
Regional / mid-size firm	Mid-market businesses ($5M–$50M), multiple owners, complex exits	Solo service businesses who get lost in the volume
Small local CPA firm	Small businesses, owner-operators, individuals with moderate complexity	Depends heavily on individual CPA expertise — ask specifically about your situation
Boutique firm specializing in business owners	Owners specifically — S-corp, payroll, quarterly planning, advisor coordination	May not handle estate planning, international, or niche specialties
Tax prep chain (H&R Block, etc.)	Simple W-2 filers, single returns	Business owners with even moderate complexity

What a reasonable annual CPA engagement costs

Typical fee ranges — California S-corp owner

S-corp return (Form 1120-S) only$800–$2,000 depending on complexity

Personal return (1040) with S-corp K-1$500–$1,500

Payroll tax returns (Form 941, W-2s) — if CPA handles$300–$800 (most owners use payroll service instead)

Combined S-corp + personal at a planning-oriented firm$2,000–$5,000 typical range

Add: mid-year planning meetings, phone consultations$500–$2,000 additional

Total annual engagement$2,500–$7,000 for a well-served S-corp owner

A CPA charging $1,200 total for an S-corp return + personal return is likely a filing firm running volume. The math doesn't support proactive planning at that price. The right question isn't the lowest fee — it's the best return on the CPA relationship, measured in tax savings and avoided mistakes.

Ask for an engagement letter with defined scope

A professional CPA will provide an engagement letter that specifies exactly what is included in the annual fee — which returns, which consultations, and what triggers additional billing. This protects both parties and sets expectations. If a CPA won’t provide an engagement letter, that’s a professionalism gap worth considering.

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What Proactive Tax Planning Actually Looks Like

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Why Your Business and Personal Tax Returns Need to Be Coordinated

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Frequently asked

Questions owners actually ask

What's the difference between a CPA, an EA, and a tax preparer?: A CPA (Certified Public Accountant) is licensed by the state after passing the CPA exam and meeting education and experience requirements. An EA (Enrolled Agent) is federally licensed by the IRS after passing a comprehensive exam — they specialize in tax representation and are strong for tax planning and audit work. A tax preparer is an unlicensed designation — anyone can call themselves a tax preparer. For a business with meaningful complexity, CPA or EA is the right credential; an unlicensed preparer is a risk.
How do I verify a CPA's license?: Every state has a CPA license lookup database. For California, check with the California Board of Accountancy (dca.ca.gov/cba). A licensed CPA should be listed with an active status. Be skeptical of anyone who uses CPA credentials but isn't listed — the designation is legally protected in all states and using it without a license is a violation.
Should my CPA also be my financial advisor?: Generally no — they're different disciplines. CPAs are trained in tax compliance, reporting, and planning. Financial advisors (CFPs, RIAs) specialize in investment management, asset allocation, and financial planning. The most important thing is that they communicate with each other — decisions about Roth conversions, capital gain timing, and retirement plan contributions need input from both. A good CPA actively coordinates with your advisor on these decisions.
How often should I be hearing from my CPA?: At minimum: once in Q3 or early Q4 to review the year-to-date and identify year-end planning opportunities; once when filing; and responsiveness when you have questions. A CPA who only surfaces at tax time isn't doing proactive planning. For higher-revenue businesses, quarterly check-ins are common and worth paying for.
What should I bring to my first CPA meeting?: Prior year's tax returns (personal and business), year-to-date profit and loss statement, payroll summary if you have employees, recent bank and brokerage statements, any documents for significant transactions (asset purchases, sales, new loans), and a list of major changes during the year (new employees, new service lines, vehicles, home office changes). The more organized you are, the less time you pay for your CPA to reconstruct the picture.

Take the next step

Turn tax questions into a plan. Talk with Matt or see how we work with operating business owners.

Talk with Matt See how we work with owners

Educational content only.This article is for informational purposes and does not constitute tax, legal, or investment advice. Every owner’s facts are different; consult a qualified CPA and advisor before acting. Tax and accounting services are provided through Matt Reese, CPA; investment advisory services are provided through Measured Risk Portfolios, a registered investment adviser. Matt Reese, CPA and Measured Risk Portfolios are separate entities; clients are not required to engage both.