A bookkeeper’s job traditionally involves recording and organizing all your financial transactions and preparing your financial statements. While some bookkeepers do offer the service of preparing and filing your tax returns, it is quite uncommon. The bookkeepers who can do your taxes on your behalf must have an IRS Preparer Tax Identification Number (PTIN) to be authorized to prepare tax returns in the United States. It is important to find out when looking for a bookkeeper what services they do offer and what qualifications they have to perform those services.
So, while there are a few bookkeepers who can do your taxes for you, most businesses employ a bookkeeper for the daily year-round tasks to keep their books up-to-date and accurate then turn to a qualified accountant, such as a Certified Public Accountant (CPA), for all tax preparation and filing. An accountant typically has more tax knowledge than a bookkeeper and will be more up-to-date with all tax laws and potential deductions. Keep in mind, that an accountant cannot do their job properly without those up-to-date records your bookkeeper kept all year. Paying an accountant to do a bookkeeper’s job can get expensive very fast, as they will charge much more for their time.
Are there any tasks that a bookkeeper cannot perform?
A bookkeeper cannot file taxes on your behalf without having a Preparer Tax Identification Number. A bookkeeper also does not interpret or analyze the data they supply, that is an accountant’s specialty.
A bookkeeper tends to stick with recording and organizing the financial data and then using the data to prepare the financial statements. They can also help with verifying receipts and issuing invoices.
Can a bookkeeper call themselves an accountant?
No, a bookkeeper cannot call themselves an accountant. To become an accountant, there are educational requirements. A bookkeeper does not require any degree or certification. Although, it would be wise to hire a bookkeeper who has taken the initiative to become certified.
Can a bookkeeper pay my bills on my behalf?
Yes, a common bookkeeping task that most bookkeepers offer is managing your accounts receivable and accounts payable. This means they will make sure you are both getting paid and paying your bills.
Can a bookkeeper prepare tax returns?
Many bookkeepers offer tax preparation services, which means they make sure all your financial documents are prepared and ready for tax filing. Not all bookkeepers can prepare your tax returns for you though, but some may offer this service, it just requires the bookkeeper to have a preparer’s tax identification number.
Do bookkeepers do payroll?
Some bookkeepers do offer the service of completing your payroll, but payroll can be a complicated process. Each employee’s gross income must be calculated using their hourly wage and any unpaid time off or overtime worked must also be considered. Then deductions should be calculated, in their specific order, followed by any contributions, such as to a retirement account. Not to mention that each employee can change their W-4 (withholding statement) whenever they deem necessary, changing aspects of how their paycheck will be calculated. Payroll can quickly become more stressful than it is worth, which is why it is mostly outsourced. Luckily, this process can also be automated nowadays with payroll software making the process even smoother.
Most bookkeepers simply input the data into your books after a payroll service completes the payroll and sends the documentation to you. A bookkeeper will post the payroll information to the corresponding journal to track it properly. Those wage expenses will also be shown on your income statement under operating expenses. It is important to track how much you are paying employees as it can help you when determining if you have the extra funds to hire another employee. It is also crucial to reconcile your payroll regularly to make sure there are not any errors occurring.
Do bookkeepers work alone?
A bookkeeper may work alone, but that is not mandatory. A bookkeeper may work for an accounting team, or a bookkeeping service, or may work individually as a freelancer. A bookkeeper may also work on-site, in an office, or from home.
Do I need a bookkeeper for my small business?
Whether or not you need a bookkeeper for your small business all depends on your specific situation. In the beginning, you may be able to keep up with the bookkeeping yourself, but as your business grows, so does the amount of work you have to put into it.
The time-consuming, meticulous data entry involved in keeping up with your bookkeeping may become a chore you just don’t have time to deal with. It is important to calculate how much time you are spending on the bookkeeping tasks and give that time a monetary equivalent so you can see how much of your time it is literally costing to do your own books. If you wouldn’t be spending much extra to outsource the task, it is most likely the best route to take. A professional bookkeeper can keep your books up-to-date and accurate and provide you with the necessary reports regularly.
If you are on the fence about paying someone else to do the job, know that letting your books fall behind is not the answer. When your books fall behind, you will be making decisions blindly and your chances of attracting a lender or investor become slim. The information you receive from your bookkeeping reports is invaluable.
Do I need a bookkeeper or an accountant?
While both a bookkeeper and an accountant have the same overall goal of helping you with your financials, it depends on your current needs whether you need a bookkeeper or an accountant, or both. A bookkeeper’s responsibilities include tracking your day-to-day financial transactions and classifying them into their appropriate journals. They also will create your financial reports and reconcile your accounts on a regular basis. Bookkeeping is characteristically considered a data-entry profession. They use the data already provided to do their tasks. Bookkeepers also do not require any specific degrees or certifications.
An accountant does not typically do the day-to-day work, they handle your tax needs and offer you financial advice to help with your business. An accountant uses their acquired knowledge to analyze and evaluate the records and reports the bookkeeper produces. An accountant goes through more schooling and has more qualifications than most bookkeepers do, which is why it costs more to hire an accountant. You do not want your accountant doing or catching up on your books, that is a bookkeeper’s job. Paying an accountant to do a bookkeeper’s job is a significant unnecessary expense.
Whether your business needs an accountant or a bookkeeper, it is always important to do your research before hiring anyone. Make sure you read reviews of current and past clients and inquire about any accreditations and experience that they have.
Do you need a bookkeeper if you have QuickBooks?
While some of the bookkeeping process is automated with the use of accounting software like QuickBooks, you still need eyes on the data. For example, you, or a bookkeeper on your behalf, should perform reconciliations to make sure the data in QuickBooks is accurate. Also, some accounts may not automatically import into QuickBooks, so someone would need to manually enter all of those transactions.
Does a bookkeeper need to be local?
No, a bookkeeper does not need to be local. While some business owners may choose to use a bookkeeper they can see face to face, many believe communicating via phone, email, or online virtual conference is sufficient. Limiting yourself to a bookkeeper that is local to you could mean going with a bookkeeper that does not have specific knowledge of your business. Widening the net and looking for a remote bookkeeper allows you the chance to find someone who would be a better choice for your particular needs.