A Good Accountant Is Worth His Weight In Gold

Based on personal experience, hiring an accountant won’t reduce the gray hairs that come with running your own business, but having a good one will save you some money and help fend off the IRS to boot.

Fact is, if you’re a sole proprietor and file a Schedule C with your tax return, you have a very high chance of being audited by the IRS. And even if you’re doing everything right, an audit can be intimidating, expensive, and have you tearing out your hair.

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Here are some general issues to consider when searching for an accountant:

Firm Size: There are some fine one or two person firms, as well as huge multi-national operations with thousands of accountants and dozens of specialized divisions. If your business is grossing less than about a million dollars a year, you might find your needs best served by a firm where you can have a personal relationship with an individual. If your business is larger, you may find you need a firm that can offer a broader range of specialized advice on issues like employee compensation and benefits, pension plans, etc.

In either case, be sure you meet the person who’ll be handling your account, not just the individual who “sells” you on the firm. If you go with a medium size or larger firm, a junior accountant will most likely be doing the actual work on your account. If this is the case, be sure the appropriate oversight is in place to ensure you the benefit of a more seasoned eye.

Qualifications: Not all accountants carry the same level of professional distinction. My advice is to use a Certified Public Accountant (CPA) for your tax preparation. CPAs must pass a rigorous exam and are required to complete continuing education every year to keep current. And while someone who doesn’t have a CPA designation may be qualified, the IRS, your banker, and others will place more confidence in a CPA than they would in a non-CPA. You may also want to look for your accountant to be a member of the American Institute of Certified Public Accountants (AICPA) as they require certain minimum level of professionalism.

Specialization: Given the complexity of our tax laws, it’s best to find a firm with some experience in your industry or at least in the type (manufacturing vs. service vs. retail) and size of business you operate.

Services: The biggest accounting complaint we hear from business owners is that their accountant doesn’t really provide the level of advice they want. Unfortunately, it’s very hard to find an individual CPA who can “do it all”. In fact, these days just keeping up with the tax code is a full time job. So before you go CPA-shopping, decide what you really need most and try not to squeeze a square peg into a round hole. Do you just want your taxes prepared at year-end? Do you want tax planning and financial advice? Do you need someone who can help you with employee compensation and benefit issues? Are you looking for personal retirement and investment planning? Once you decide what you want, interview potential accountants to be sure they can handle those things that are most important to you.

References: It’s one thing for an accountant to tell you what they can do for you. It’s another for their clients to tell you what they actually do.

Referrals: The best way to find a good accountant is to talk to other business owners about who they use. We’ve found that people tend to have strong opinions about their advisers and are more than willing to refer a good one. Ask them if they are happy with the level of advice, contact, and attention they receive from their adviser.

Insurance: Be sure that the firm or individual you choose carries professional insurance and is willing to represent you in the event that your tax returns are audited.

Price: While you really don’t want to buy accounting advice from the lowest bidder, rates and fees do vary so you’ll want to check around. Fees for accounting services vary based on the size of the firm, the experience of the accountant, and the area of the country in which the firm is located. Rates typically range from $50 to over $300 per hour. An uncomplicated small business tax return will likely cost between $500 and $1,500. You might want to take your prior year return to the prospective accountant so they can give you an idea of what their fees will be. If a junior person is going to do the actual number crunching, you should be billed at the lower rate for his or her time.

Finally, be sure you’re comfortable with the individual you choose. While you shouldn’t choose an accountant simply because you like him or her, you shouldn’t settle on someone you don’t like. And once again, be sure the person you meet is the person who’ll actually be handling your account.

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