Bookkeeper vs Tax Preparer: Who Should You Hire First As A Startup Founder?

Bookkeeper vs Tax Preparer - Who to Hire First?


Financial management is a vital component of startup success in the fast-paced world of entrepreneurship, where every choice made can make or break the company. As a business expands, so do the financial obligations that come with it, and for startup entrepreneurs, balancing several responsibilities is the norm.  

We will explore the key distinctions between a tax preparer and a bookkeeper in this extensive guide to assist startup entrepreneurs in choosing the right option for their finance team.

One of the most important decisions entrepreneurs must make during the turbulent startup journey is choosing who and when to engage in financial management.  To ensure that a startup is compliant and has sound finances, you can use our Inkle books and Inkle Tax for managing finances like a pro!

Many people don’t know the difference between an accountant and a bookkeeper. Let’s simplify. 

A tax preparer files tax forms and helps in reducing tax liability. Tax preparation is a growing profession and brings a valuable and essential service to the community. On the other hand, bookkeeping, in simple words, is the handling of day-to-day financial transactions.

Now, let’s dive deep into the concepts.

Who is a Bookkeeper?

The task of monitoring a company's financials falls to the bookkeeper. This involves keeping track of every dollar earned and spent, balancing bank accounts, and creating financial statements. Additionally, bookkeepers guarantee the accuracy and timeliness of all financial records. Your business's daily financial tracking is handled by a bookkeeper. 

They assist you in keeping everything organised, tracking spending, and generating income reports. In this manner, you'll be prepared to submit your taxes and make critical financial decisions when the time comes.

Duties of a Bookkeeper

  1. Record financial transactions
  2. Reconcile bank accounts
  3. Generate financial reports
  4. Manage accounts payable and accounts receivable
  5. Maintain accurate financial records
  6. Prepare budgets and forecasts

Who is a Tax Preparer?

Preparing, filing, or helping with standard tax forms is what most tax preparers do. In addition to providing these fundamental services, a tax preparer can represent a taxpayer with the IRS.  Nonetheless, a tax preparer's level of ability depends on their credentials and whether or not they are granted representation rights.

In a sense, tax preparers are required to serve both the IRS and their clients. They have to help their clients minimise their tax liability while also helping them to comply with State and Federal tax rules. They are employed to assist their client, but they also have a duty to uphold their legal obligations, refrain from breaking any laws, and refrain from aiding or abetting others in filing fraudulent returns.

For both individuals and corporations, tax returns must be prepared and filed by a tax preparer. They guarantee timely and precise filing of all tax documentation. Tax preparers also offer their clients tax counsel and advice throughout the year. They'll assist you in finding deductions, organise all your documentation, and sometimes even assist you with filing your taxes. 

Basically, it all depends on who you hire.

Duties of a Tax Preparer

  1. Prepare and file tax returns
  2. Provide tax advice and guidance
  3. Assist with tax planning and strategy
  4. Represent clients in front of the IRS
  5. Help clients navigate complex tax laws and regulations

Differences Between Bookkeepers and Tax Preparers?

A company's accounting function is made up of many key players. In order to choose the right role for your startup's needs and stage, it's critical for founders to comprehend the differences between these roles. Thus, let's quickly go over the differences between a bookkeeper and a tax preparer.

Basis of DistinctionBookkeeperTax Preparer
RoleThe daily documenting of financial transactions is done by a bookkeeper. Bookkeepers assist you with preparing your financial statements in addition to organising and maintaining your financial records.A tax preparer is an expert in tax preparation and filing. Tax preparers maximise tax savings while ensuring correct and timely tax filing.
ResponsibilitiesKeeping track of accounts receivable and bills, monitoring accounts due and making bill payments, balancing credit card and bank statements, sorting revenue and expenses, generating financial reports such as profit and loss accountsPreparing and submitting tax returns for businesses, preparing business owners' individual tax returns, calculating projected quarterly tax payments, provide guidance on tax credits and deductions, assisting in the resolution of tax authority notices, keeping up on amendments to tax laws
Importance for StartupsIn the early phases of a startup, bookkeepers assist in laying the financial groundwork. A bookkeeper contributes to creating the foundation for future financial prosperity.While tax preparers support the tracking of earnings and expenses. This piece of information is essential for predicting, budgeting, and making wise financial decisions.
Focus and ScopeHelps in Strategic focus. Their main goal is to keep correct financial records and make sure that the financial information of the business is organised and easily accessible.Helps in transactional focus. Tax preparers have a more strategic approach, examining more than just daily transactions in order to optimise a business's tax position.
Timing of InvolvementBookkeepers work all year round, keeping up-to-date financial records. They are always working providing a continual picture of the company's financial situation.Tax preparers are usually hired on a periodic basis, particularly during tax season or when tax planning is necessary. Although their participation is less frequent, it is essential to guarantee compliance and maximise the business's tax plan.
Skill SetsAs their job requires them to precisely record and categorise a multitude of financial transactions, bookkeepers must possess a keen attention to detail. Generating trustworthy financial reports requires close attention to detail.A more strategic and analytical attitude is needed for tax preparers. They have to analyse financial information, spot possibilities to save taxes, and make sure the business complies with tax laws.
Certificate RequirementsNo specific certifications are required to perform their duties. However, many bookkeepers choose to obtain certifications from institutions like the American Institute of Professional Bookkeepers (AIPB).Conversely, tax preparers must get a Preparer Tax Identification Number (PTIN) from the IRS. Additional credentials, like a licence as a Certified Public Accountant (CPA) or Enrolled Agent (EA), can also be necessary for them to obtain.
Education and TrainingAlthough it's not absolutely necessary, bookkeepers usually hold a degree in accounting, finance, or a similar discipline. They may complete bookkeeping courses or training courses.It is mandatory for tax preparers to possess a high school diploma or its equivalent. They might also finish tax preparation courses or training programs.

While distinct, the roles of a bookkeeper and a tax preparer are interdependent. An all-round approach to financial management is ensured by these professionals working seamlessly together. Effective communication channels and integrated systems are essential for a startup's success. 

Comprehending the interdependence of these roles facilitates founders in assembling a comprehensive financial team that attends to both short- and long-term requirements.

Which One Do You Need?


Collaborate with a bookkeeper from the very start to regularly document your financial transactions. This guarantees accurate financial accounts, compliance tax filings, and well-organised records. An outsourced part-time bookkeeper can be really helpful for your business. You can take care of some simple things on your own, such as billing clients and collecting receipts.

Tax Preparer

Hiring a tax preparer at the outset of your firm is essential. Your best line of defence against incurring fines for late or inaccurate filings is a competent tax preparer and careful tax planning. By optimising write-offs and credits, they will also help you save money.

What kind of bookkeeper or tax preparer you require will depend on your particular demands as a business. A bookkeeper may assist you in becoming organised and maintaining your financial records if you are just starting out and need assistance keeping track of your finances. In case your firm is more established, and you require assistance with tax planning and strategy, hiring a tax preparer could be the best option.

It is crucial to take into account a financial professional's expertise and proficiency in the particular areas you require assistance with when making your decision. Look for someone who has a proven track record of accomplishment in their field and who can provide references from other satisfied clients. And not only that, choose someone who you feel comfortable with and who shares your values and goals for your business. 

As you want your company to remain viable for a long time, you can work with your financial team to prioritise tasks according to your long-term financial goals and identify each person's roles in reaching those goals. Your accountant and tax preparer can quickly resolve any misunderstandings or problems that may develop by maintaining open lines of communication.

A smart move would be to hire a bookkeeper first to lay the groundwork for a sound financial structure, and then, when your financial situation becomes more complex, that's when you bring in a tax preparer. This structured strategy enables scalability, in line with your startup's changing needs.


In conclusion, even though they both deal with funds, bookkeepers and tax preparers have distinct specialities and areas of focus. While tax preparers assist businesses in preparing and filing tax returns as well as offering tax advice and guidance, bookkeepers assist businesses in maintaining correct financial records and creating financial reports.

In an ideal world, tax preparers and accountants collaborate well to give you the greatest possible result in the form of enhanced profit, cost-effectiveness, and well-functioning systems. They might, however, occasionally have opposing objectives. For instance, your tax preparer might suggest you make an investment because they claim an investment will benefit your annual return taxes. However, your accountant will examine your present cash flow and profitability to determine whether or not such an investment makes sense. They do not wish to see any negative effects on your long-term goals or short-term money. 

The functions of a bookkeeper and a tax preparer are different but complementary in the complex world of startup finance. In the end, managing the challenges of entrepreneurship and attaining long-term financial success requires a well-rounded financial team that includes both a bookkeeper and a tax preparer.

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