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View Full Version : Choosing an Accountant/Tax Preparer



Evan
09-05-2008, 11:48 PM
One of the most crucial relationships you may develop as a small business owner is with an accountant. Your accountant may serve you in a variety of ways throughout the year, but most commonly is utilized as a tax preparer. Accountants can also help you with payroll, auditing, monthly closings, account reconciliations, cash management, accounts receivable, accounts payable, accounting for your fixed assets/depreciation, accounting for intangible assets/amortization, and much much more.

There are several factors you should look at before you choose your accountant. While it may seem that any person advertising themselves as an accountant would suffice, you should check out multiple sources and choose the best for your needs.

You should look for the following information from your accountant:


Credentials. There are a lot of credentials that a person may have, the most common being the CPA (certified public accountant). A CPA can provide the widest array of services and has stringent requirements to maintain their status. Some other credentials are EA's, or enrolled agents or PTPs, professional tax preparer. Some EAs and PTPs also provide accounting services. EA's are granted their status by the Internal Revenue Service, while PTPs are granted by the National Association of Tax Preparers. Many other type of credentials do exist, but those will be the most common for accountants or a tax preparer.
Education. In absence of credentials, look for a good education of an accountant. A bachelor of science/arts in accounting would be the minimum you should accept. An MBA, MPAcc, or MST would also suffice.
Experience. While years of experience may play a role, see if they're experienced in your particular industry. If you have inventory and the accountant deals with only service industries, (s)he may not be best for your needs. Also specific industry experience may be beneficial. If your accountant works with other restaurants, (s)he may know of deductions, tax credits, or other accounting tid bits to help your business.
Services. What exactly are your needs, and what can they do to meet them? Your accountant may not be quipped to handle all of your needs, in which case you may need to find an alternative. Not all accountants will do payroll or audits. In fact, only CPAs are licensed to provide an attestation that your books are materially correct based on the information you presented them. Others would only be able to verify the information. Make sure that your accountant can provide the basic services your looking for, and if not, perhaps they can provide a recommendation for another provider.
Rates. Accounting services are not cheap, and the most expensive accountant isn't necessarily the best. If you are solely motivated by the cost of services, you could be cutting yourself short. But feel free to ask an accountant about their hourly rates. Sometimes it may depend on the service rendered. You may be able to negotiate the price, but expect to pay the base rate provided by the accountant.

Good luck in choosing your accountant, and be sure to maintain a relationship with him/her throughout the year. An accountant can be one of your best business partners.

vangogh
09-06-2008, 12:13 AM
Thanks for the info Evan. At the moment my accounting needs are within my own abilities, but I hope to grow to the point where that changes and I do hire someone.


While years of experience may play a role, see if they're experienced in your particular industry. If you have inventory and the accountant deals with only service industries, (s)he may not be best for your needs.

Your whole point about experience is a really good one and I wanted to point it out again since I think it's often true of many service based businesses. You should always be looking for specific experience or at least related experience with your industry. In some cases it may not matter, but more often it can be very important.

KristineS
09-06-2008, 10:22 AM
Great advice Evan. Thanks for sharing it. I especially like the definitions of the different sorts of certification accountants can have. That's very helpful since all I knew about was the CPA.

Evan
09-06-2008, 04:05 PM
EA's, I should note, stand for "Enrolled Agents", and many aren't accountants by nature but are tax professionals. Some will provide accounting-related services, but others may strictly deal with tax matters.

If you ever have a dispute before the tax court, only three credentials are acceptable to argue before the court: the CPA, the EA, or an attorney (JD). So for tax matters, you may find either designation (CPA or EA) helpful.

KristineS
09-06-2008, 04:33 PM
Didn't know that either. I hope I never have to argue any tax matters before the court, but it's good to know who could testify on my behalf if I did.

kenlew
09-08-2008, 10:53 PM
I would recommend that for *most* small businesses, hiring a CPA is overkill unless you have a really complex issue. You will pay double (or more) and most tasks can be handled very well by a good, competent, degreed accountant, provided they have good solid experience. Check references regardless of who you use.

vangogh
09-09-2008, 12:01 AM
I think it depends on the business. I agree that for many it's not really necessary. I know I handle things myself and do my taxes. However I can also look at how much time I spend on taxes each year. I could probably hire an accountant to do the work and in all likelihood it the time it would free me up for other things is worth more than what I would spend.

BillR
09-10-2008, 11:01 AM
I would recommend that for *most* small businesses, hiring a CPA is overkill unless you have a really complex issue. You will pay double (or more) and most tasks can be handled very well by a good, competent, degreed accountant, provided they have good solid experience. Check references regardless of who you use.

I agree on the cost. I don't agree that it's overkills.

Taxes are one of those things that have to be right the first time. If they are not right doing the corrective action is a major pain in the butt.

The upside of using a cheaper - and arguably very knowledgable - accountant is that you save a few hundred bucks.

The downside risk however is huge. You could end up in court. Assuming you've done your references on CPA's vs. accountants I'd personally stick with the CPA.

We use two actually. We use one for taxes/accounting during the year and we have another one perform audits of our books. It's worked well so far.

Evan
09-11-2008, 01:57 PM
I would recommend that for *most* small businesses, hiring a CPA is overkill unless you have a really complex issue.

It will depend on the needs of your business. An accountant can probably help you with most items with your business, including preparing the tax return. Yet if there is an audit, which the IRS is performing more of, only an attorney, enrolled agent, or a CPA can argue a case before the tax court.

Some CPAs may not deal with taxes at all. I know of several who cringe at taxes. Just because there is the designation doesn't mean they perform those services. Even if they do, you'd want to make sure they satisfy your needs.

Tax preparation costs can vary considerably. But if you hire a CPA working from home, his costs would be much less than hiring a CPA firm to prepare your taxes. Again though, it depends on the size of your business and your needs.

Blessed
09-12-2008, 08:19 AM
Great advice Evan - right now I do my own taxes and bookwork but one of the first "extras" I plan on giving myself once we've got our debt paid off is to hire a CPA or EA for my taxes. They stress me out :)

Fortunately my business is very straightforward on the money end so I do feel confident that if I were ever audited (oh the horror) we'd be fine but I'd like to not have the stress of that.