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Finding a tax accountant should be an easy task. A simple internet search will return a dozen tax preparers in your area. The problem with this type of search is, you have little to go on other than a list. Is the person qualified, knowledgeable? There are ways to determine this. Are their rates competitive? People tend to shy away from asking about fees. Does the office have a CPA on staff? Chain tax preparers claim they do. The reality is that they have a CPA they can call on when needed, not one in the office regularly. Have they been practicing long? While tenure doesn’t necessarily imply knowledge, it does help address some questions. If you seek a tax only accountant, this is the article for you. If your seeking an all-purpose accountant see our article, “Choosing a CPA for a Small Business“.
Beyond the Basic
Moving beyond the general 1040 preparation for someone with only a W-2 is a challenge. One needs to consider several factors when finding a tax accountant. In this article we will consider some basic ideas. What does your tax preparer offer beyond the return. This is crucial as people get older. As we develop more complex returns, our needs beyond the basics change. How aggressive do you want your tax accountant? Some clients desire a “winner takes all” approach, but others are more conservative. Honesty, should be paramount in your accountant, can you determine this about yours? Longevity, doesn’t equate to knowledge, yet it can signal other qualities, what are they? Is your accountant available? This can be cause for alarm if they aren’t answering their calls. The size firm you’re comfortable with is also a consideration. Let’s take these and other issues and break them out for consideration.
As you’ll see, finding a tax accountant isn’t difficult, it’s a step process. In the end, if you follow some basic rules, you should be well represented when you need it.
What’s covered beyond the return
When finding a tax accountant, you should sit down with your candidate and discuss your situation. Outside of tax season of course. Do not expect to see a professional at their best when they are steeped in tax returns. The stress of tax season is major, some tax professionals won’t take new clients after February 28th. Offices differ but don’t perceive this as a sign of weakness, it’s a reality of the profession. Professionals work to their strength and don’t over extend themselves, tax accountants subscribe to this edict. Time is valuable, especially during tax season. Do not expect your accountant to be immune to this fact.
I’ve seen a similar situation play out time and again. A person bursts into the office on April 10th with over-stuffed envelopes of receipts and paperwork. They describe how they need to get their taxes done and “this never happens,” that they wait so late. Promptly they are informed that an extension can be filed, but the return will have to wait. Some are okay with this, but many get aggravated that they are not being catered to. The reality is, tax accountants work long hours during tax season and you’re not the only person with needs. If you think any moment after January 1st is a good time to get into a deep discussion with a tax accountant, it’s probably not a good idea. Other times are pressure filled too, like the extension deadlines, but January 1st to April 15th is the worst.
Now that we’ve covered the worst times to vet a potential tax accountant, let’s consider other services you should ask about. Many of these items will depend on your situation, but in a generic sense, you should consider the following. Whether you’re a business or individual, you should always contemplate that a letter from the IRS is possible. They may be adjusting your return for cause or in error. In either case, make sure your accountant can help in these situations. If they have to send a response or show up for an audit, can/will they handle it? Never assume that just because they prepare your taxes that they will perform other functions. The tax kiosk at Walmart disappears on April 16th, are they going to help you? Could you even find them if you had to?
The Big Picture
Individual tax payers should look at the long range. Can your tax accountant advise you on moves that affect your tax liability? Tax planning is a big part of your future and finding someone that can help with this is paramount. Everything from planning for retirement to saving for your kid’s college should be discussed with your potential adviser. Business should also consider this aspect. Can your tax accountant review your potential large purchases and advise the best treatment of them? Buying a $100,000 piece of construction equipment isn’t the hard part. How you treat that equipment for tax purposes is. Your asset depreciation can affect not just your tax situation, but also your financial statements. Can your tax person advise you on methods that don’t skew either in a bad direction? Just because you can use bonus depreciation, should you?
Other areas to consider are regular accounting services. Can this tax person provide payroll or business planning should you need them? Far too often businesses will separate several services between different companies, but why? If you find an accountant that can handle several services, it could cut the overall expense. In addition, it saves you time by having one place to contact instead of three or four. In the end, finding a tax accountant shouldn’t be stressful. It should be a process that you undertake to find a new addition to your arsenal of money saving devices. Remember, it’s not about how much you make, it’s about how much you save.
Mild or spicy?
The determination of how aggressive your accountant is has a lot to do with your risk appetite. Finding a tax accountant that shares your feelings on stretching deductions and tax treatments is key in making you comfortable at tax time.
Mild Tax Treatment
Some accountants take a conservative stance on tax issues. They favor the safe route when using deductions and credits. This isn’t inherently a bad thing. Many tax payers feel the same. They look at taxation as a method where by they should pay in and not try to push the boundaries. These individuals take the “I should pay my part into the system” approach. This does not mean they are paying too much, they just are taking the path of least resistance. I know people that leave a rolling amounts of money applied to the following years taxes every season. They feel it’s better to leave backup cash left with the Feds, for a rainy day so to speak. The downside in this is that you may fail to take advantage of some strategies that could save money.
Hot Tax Treatment
There are accountants that will actively hunt down every deduction available, to a fault. Chasing tax savings and strategies takes time. Finding loopholes in the tax code is nothing new. It’s the difference between tax avoidance and tax evasion. Tax avoidance is any legal means that you employ to lower your tax burden. Taking advantage of what the congress has provided to you, is not wrong. Tax avoidance is merely seeking to pay as little income tax within the boundaries of the law. Tax evasion however, is illegal. It is the overt attempt to not pay taxes that you owe. The line between the two can become grey at times and this is where an aggressive accountant thrives. Working the middle zone can save lots of money but does come with the risk of audit. If being audited isn’t one of your fears, this is the way to go.
The longer that someone has been in business, the more likely they are doing things correctly. That’s not to say that all scoundrels are weeded out by father time. The world has its fair share of those. But the longer a bad business operates, the more likely they will be blacklisted. While tenure does not always equate into quality, there is something to be said for experience gleaned over time. In general CPA’s perform 40 hours of continuing education every year. This process helps them keep up to date on new developments in accounting. Finding a tax accountant with a CPA designation ensures that they are receiving ongoing education. Compounded over time, this 40 hours a year can add up. Longevity also means they could have built up ancillary contacts to help you as well. They may know reputable attorneys, contractors and others you may need in the future.
Do They Appear Honest?
On its face, finding a tax accountant that is honest seems easy. You would think that most people could get a vibe about someone just by talking with them at a consultation. Sadly, this is not the case. Honesty, integrity and ethics are gleaned only by digging deeper. Generally, the best place to start is with an internet search.
Type in the person’s name and see what appears. This can give you some basics. Next you should try looking into social media and similar venues. Determining someone’s associations, likes and interests can tell a good story. Remember, the reality is that one can only clean up there act so much. The internet is now a treasure trove of everyone’s life story. The deeper you dig the better. Don’t you think there are people that wish they questioned Bernie Madoff a little better? Lack of attention in hiring a new confidant is something you should avoid. Be proactive and find out as much as possible about those you associate with.
Can you get them on the phone?
While you may have trouble getting “face time” with your tax preparer during tax season, you should be able to reach them most other times. If your calls go straight to voice mail and your emails sit unopened, this is a problem. It’s not surprising that many clients will change their accountant due to lack of contact. Don’t get me wrong, if you’re a time-bandit, you may have trouble getting through to the boss. The reality is, the squeaky wheel does NOT always get the oil. Do not repeatedly call your tax accountant and play the twenty-question game, you will be ignored. Look at their time the same way you look at your time, it’s valuable. As such, calling over and over with random questions is a no-no. Gather your information and call when you have several items to discuss. This will make you and your accountant happier.
Small, Medium or Large Firm
Similar to the level of aggressive accounting you prefer is the size of the firm you prefer. Some people prefer the comfort of a small office. This is usually a one or two CPA firm with three to five staff members. This size office lends itself to personal attention and close interaction with the staff. In these situations you can build a rapport with the staff. You’ll know them all by name and recognize their voices on the phone. A midsize firm is proper for those with less time for interaction. This person prefers an accounting office with four to ten CPA’s and fifteen to twenty back-up staff. While there is less personal attention, it is sometimes offset by more services. As the firms get larger they tend to have more specialized talent. This leads to more of a one stop shop for all your needs.
Large firms are usually the places where larger companies shop. This is due to the nature of the beast, large CPA firms will generally take large clients only. Many companies, not just accounting firms, adhere to this practice. Once your business reaches a certain size, they are the only companies with the resources to handle you work volume. In addition, many large businesses handle much of their accounting needs in house and only use the CPA firm for specific work.
Finding a tax accountant can be simplified by using a referral approach. Not every matter in life should be performed from the bottom up, why not enlist some help. Friends, colleagues and business associates can be a wealth of information when seeking new services. If you endeavor to find a new accountant, ask around. However, do not just go with the first option. Gather several different avenues to explore. If you have been given the same person by several friends, this possibility has promise. The more people a business is keeping happy, means they are doing something right. This is always the first lead to follow. Remember, you don’t need to settle for the first choice, do your homework. Talking to two or three potential accountants should not be out of the question. If you luck out and have a good vibe with the first you visit, bravo.
This is the toughest part of the whole process, getting cost information. Accountants have an easy time giving cost advice but pinning them down on their pricing is another story. The hard part with fees is that there are several types of fees you could be charged. Finding a tax accountant is hard enough without having to mine through their price structure. For most tax work you tend to have three types of fees, by the job, hourly and per-form.
This is a version of pricing where the client is billed for each form they need in their tax packet. It has been exacerbated by the rise of increasingly better tax software. These days instead of having to calculate the per-form cost by hand, the preparation software does it all. With such ease comes a willingness by preparers to utilize this income generating tool. Make no mistake, I am not a fan of this type of pricing. I feel it lends itself to the most price creep. What I mean is that over time, it is easier for the preparer to charge more and more. We should all be paid for the time we spend on a return, but one size fits all form pricing is out. In these situations, the person with less information per form is hit harder than those with more.
This price structure is another that is increasingly being used by firms. You get charged by the amount of time spent on your return. While a step up from per-form pricing, hourly is still not optimum. Some firms are using this price structure to their determent as well. Recent stories indicate that a large number of younger workers are not enjoying hourly billing. What this means is that the employees, more than the clients, do not want to bill hourly. They feel hourly billing stifles what should be the time to get creative and innovative. This could be true when you consider that an employee may be less likely to follow tax saving research because they have to charge for every second of it. Hourly billing is a viable way, just be sure you know when the clock starts and stops.
Per Job Billing
This form of pricing has always been my favorite from both sides, as a purchaser and provider of services. With per job billing you are provided with an upfront quote for the work to be performed. This is done via the engagement letter, which you should be given in any of these circumstances. Along with the quote you are also informed that cost overruns that could change the quote will be brought to your attention, prior to extra work being performed. While some tax accountants shy away from this type of billing, many of the older generation still use it. That being said, you may find it difficult to retain an accountant that subscribes to this practice. Many are using the hourly and per-form models. In either case, always get pricing structure up front.
Licenses: CPA or EA
Having a designation is key when finding a tax accountant. There are several different types of tax preparers. The two you should be focusing on are either a CPA or an EA.
Finding a tax accountant that is a CPA is a good way to start. They can get to the solution of many, if not all, accounting dilemmas you have. Always look for this designation before all others. A CPA can handle financial statement preparation, tax work and more. CPA’s must perform a total of 120 hours of continuing education every three years. Areas of study vary because the CPA has many areas of knowledge. They can perform tax preparation for all entities and basically unravel many of life’s great mysteries.
This is a designation bestowed upon individuals that have targeted tax preparation as a primary focus. EA’s have taken three exams administered by IRS through Prometric (which is where most professional testing is done today). The tests are in the areas of personal and business taxation and law/regulation as it pertains to the tax system in the US. I will say this of the IRS EA Exams, they’re tough. EA’s also have to perform 72 hours of continuing education every three years.
The Bottom Line
No matter why you’re in the position of finding a tax accountant, take your time. Many of life’s decisions should not be rushed, this is one of them. The person you bring on board for your tax work could be with you for many years. Try to make it someone you trust, are compatible with and enjoy working with. This person will be helping you through various tax and accounting situations. Take the time to make sure you make the best choice.