At Polymath, we see it all the time. A new client comes to us hoping we can help them get their business books cleaned up so they can get their taxes filed, and upon reviewing their books it is clear that they have been getting either no advice or very bad advice from their tax accountant in past years. This results in poor management practices, incorrectly filed tax returns, and a suffering bottom line.
Finding the Right Tax Accountant
Polymath doesn’t offer tax services. We specialize in management accounting and business strategy services, focusing on the tours & activities industry. There are some great tax accountants out there, and at Polymath we’ve developed some awesome relationships with a few that we share multiple clients with. Of course, each one has their own specialties and may or may not be the best fit for your business’s unique needs.
So, how do you tell which tax accountants do great work AND are a good fit for you? You’ll want to choose wisely. Even when your tax return is prepared by someone else, you are still legally and financially responsible for everything on it.
We’ve composed this easy list of the Top 11 Questions for Finding the Right Tax Accountant that you can use as a reference guide as you interview potential candidates. Keep in mind that you will want to interview at least three to compare and ensure that you are getting the best fit.
1. What credential does your tax accountant have, and is it current?
Many businesses don’t need a full CPA just to file their taxes. The main thing that a Certified Public Accountant has that an Enrolled Agent or Licensed Tax Preparer/Consultant does not have is an extra level of insurance that can support you in case of a government audit. Non-CPA tax professionals are often less expensive than CPA’s, but you will want to ensure that they will be able to support you in all areas that your business needs. CPA’s, EA’s, and Tax Attorneys can represent you to government agencies in case of an audit, whereas state tax licenses cannot. Ask them to educate you about how their credentials may or may not be a good fit for your business. The good ones will be happy to do so and point you in the right direction if there is something you need that they do not have.
Regardless of their claimed designation, you will want to ensure that your tax accountant is who they say they are and qualified to help you. To verify that your tax preparer is legit, ask them for their PTIN (Preparer Tax Identification Number) as well as some long-time client references. The law requires paid tax preparers to sign client returns with their PTIN. If your tax return is not complete and/or they don’t include a PTIN on your return, do not sign it! A bogus preparer could put anything on a blank return, including their own bank account number so they can steal your refund. It also doesn’t hurt to do a background check!
2. What tax issues does your accountant specialize in?
Does your accountant even specialize in tax? I know several CPA’s that also offer “wealth management” services for their clients, such as financial planning and retirement investing. Alas, many of these focus more on those services and consider the taxes to be a throw-away afterthought. I’ve seen some dangerously sloppy tax returns come out of these offices, despite the full CPA credential. I may not be a tax accountant, but I have enough experience to spot when a tax return either doesn’t match the books or is prepared with incomplete or incorrect books. If you are going to have a professional tax accountant file your tax return, find one that actually LIKES doing tax. They learned this stuff so that you don’t have to! The unapologetic tax nerd is your ally.
3. Will your tax accountant offer proactive advice?
You want a tax accountant that asks A LOT of questions and is detail oriented. If they see something in your books that might not be correct, you want to make sure that they are going to point it out to you and recommend avenues to either fix the problem or at least ensure that it doesn’t continue. They should be able to educate you on whether you are paying too much, too little, or the right amount of tax, why, and what you can do to fix any imbalance, preferably to save you money without doing anything illegal.
Availability is also crucial. Once the filing season is over and your tax return is complete, are they going to vanish for the rest of the year, or will they continue to offer proactive tax advice that will save you time and money on your current-year return? A good tax accountant will take your call and respond to your email, regardless of the time of year. Be sure to choose someone that you feel comfortable talking you and bringing your questions to. Good communication and rapport is essential. If you have an accountant that makes you feel nervous or stupid, find one that doesn’t. You don’t have to put up with that.
4. Does your tax accountant review your balance sheet?
Too often we have seen situations where a tax accountant will simply prepare a tax return using whatever information the business owner passes their way. They don’t review it to make sure it’s correct, and they don’t verify to see if there is anything that perhaps you didn’t know they needed. You are hiring a qualified professional because you don’t know what you don’t know. If you wanted a tax return that was full of incomplete or incorrect information, you could prepare that yourself!
The balance sheet report in your books is vitally important to ensuring your books are correct and ready to have taxes prepared. Unfortunately, we have encountered many tax accountants, particularly when preparing a Schedule C or partnership tax return, that just ignore the balance sheet and work off the Profit and Loss report alone. If the accountant is doing nothing to verify that your bank accounts and credit cards are correctly reconciled, your payroll liabilities are correct, your assets have been correctly depreciated, and that your accounts payable and receivable are accurate, the information on the Profit and Loss is worthless. Check with your tax accountant to ensure that they will be proactive in verifying your information and point out any problems, even if it is not “legally required” for them to do so. The legal requirements placed upon them protect them, not you, and many will try to get away with doing the bare minimum for their clients rather than partnering with you for long term success.
5. Do you need a local tax accountant?
With the growing emergence of cloud accounting and virtual business relationships, you may be very well served by an accounting professional outside of your local area. Regardless of where they are located, you will want to ensure that they are familiar with your state and local tax laws, as many local areas have some complicated tax issues that require specialized experience.
Any time there are back taxes, where you may be receiving scrutiny from the IRS and/or state revenue agencies, it may be best to work with a local CPA. Businesses in this situation have an increased risk for audit, and trying to manage an audit remotely can be challenging. If you could be meeting with an IRS or state revenue agent, you will want your tax professional with you at those meetings to help answer questions and back you up. In that situation, be sure to find a local tax accountant that has experience in navigating an audit. Enrolled agents, CPAs and tax attorneys with a PTIN can represent you, if needed, in front of the IRS. This can apply to audits, payments and collection issues, and appeals. Most other types of tax preparers cannot help you with those situations, even if they have a PTIN, and even if they prepared your return.
6. Is your tax accountant familiar with your software/technology?
In our current day and age, you shouldn’t have to print or email reports for your tax accountant. Even uploading a backup of your QuickBooks file to an online secure portal is becoming a bit of an archaic practice. You need to know that when you have a question, your tax accountant can log into your books from their location and look at the detailed data. Find one that is certified in your accounting program.
7. Does your tax accountant specialize in your industry?
Does your industry have any nuances that may need specialized attention? How would you know? Does your industry have specialized software that could improve your workflows and save you time? Could there be special filings that are required just for you? If you aren’t using a specialist, something could be missed.
A great example of this in Polymath’s preferred industry of tours and activities companies is Hawaii. Hawaiian activity companies are required to hold client deposits in trust accounts that can be reconciled for verification, and there are regular reports that must be submitted to the state to ensure that these companies are not spending money they haven’t earned, yet.
There are many instances where what you don’t know CAN hurt you. Work with a specialist whenever possible to ensure to shed some light on your potential blind spots. Is your tax accountant experienced in your industry? How many years of experience do they have, and how many other clients do they work with in your industry? You don’t want your business to be their first rodeo.
8. Will your tax accountant grow with you and your business goals?
How much do you want to grow? Are you planning to scale your business and franchise, or do you plan to remain a “mom & pop” forever? What is your exit strategy when the time comes? You may need different accounting professionals for different stages of your business’s growth.
As your company develops, you will encounter new challenges with the correct entity type for your business size. Different tax accountants may specialize differently in the various entity types, including sole-proprietor, partnership, S or C corporation, and various non-profit entities. If your businesses needs are changing, it may be time to reevaluate whether the tax accountant that has served you well in the past is still a good fit for your needs. It is OK to change accountants when you outgrow your current relationship.
9. What is your tax accountant’s pricing structure?
There are many different structures that accounting professionals use to price their services. We generally recommend finding a professional that will offer you a package that includes advisory services on a fixed or value pricing model. You want to know in advance how much their services are going to cost your company so that you can be prepared and work this expense into your annual budget. Billing by the hour after-the-fact is a losing proposition for both sides, as it penalizes the service provider for being really good at what they do while encouraging the client to hold the professional at arm’s length in an effort to reduce fees. Paying for someone who will educate you on how to achieve your goals and advocate on your behalf is worthwhile. A good accountant will be transparent about their pricing methods. They will be able to tell you up front what their fees are, and they will offer you an engagement to sign describing the fee schedule, deliverables, and timeline for those deliverables.
On the flip side, if you come across a tax accountant whose fee is based on the size of your refund or who says they can get you a bigger refund than others, run the other way. These are generally scams. A good tax accountant may give you sound and legal advice to help you avoid paying more tax than necessary, but there is a big difference between tax avoidance and tax evasion. You don’t want someone who is essentially going to falsify a return on your behalf in an effort to get you a big refund that isn’t actually due to you, of which they get a cut. That is called FRAUD. Once the audit has come and gone and this con has left town, you will be left holding the bag. Best to find someone who will do your taxes correctly and legally the first time.
10. Does your tax accountant E-file your returns?
In our modern era, any time you have to touch paper you are wasting time. Paperless practices are a good sign that a tax accountant is current on the most up-to-date technology and routines. The IRS requires any paid tax preparer who does more than 10 returns to file electronically via the IRS’ e-file system. If your tax accountant doesn’t offer e-file services, it may be a sign that they are either way behind the times or they are not doing as much tax preparation as you thought.
11. Does your tax accountant outsource?
When you hire a professional and are paying professional rates, ensure that they are the ones actually doing the work. There are a lot of great software programs that can automate data entry and accounting processes to save time, and using those are a great sign that your tax accountant is keeping up with the times. Working with an accountant or firm that outsources manual work to international 3rd-party labor is not so good. You have a right to know who is touching your sensitive financial information, and outsourcing is generally a way for a firm to cut corners to make larger profits at the expense of integrity.
Find the right tax accountant for you
Your tax accountant is an important member of your business’s team that can make or break your company’s success. Armed with a bit of knowledge and curiosity, each business owner can find a great ally that will help their business surpass their goals, and aspire to more.
Ingrid Edstrom is the Priestess of Profits at the award winning bookkeeping firm, Polymath LLC. She has been recognized as one of the accounting profession’s Top 40 Under 40, Most Powerful Women in Accounting, and the 2017 Top “Up-N-Comer” ProAdvisor. She is a certified FICB (Fellow member – Institute for Certified Bookkeepers), and she has been instrumental in establishing the ICB in the United States, including launching their new webinar series. Ingrid is the creator the AskABookkeeper.com online education series, a member of the Intuit Trainer/Writer Network, and leader of the Southern Oregon Woodard Group. When Ingrid is not teaching or playing her favorite video game (QuickBooks!), she is usually playing Irish music or frolicking with her goats.