Before you hire a Certified Public Accountant (CPA) or accountant for your business, sit down face to face and have a discussion. Get to know the person you will be working with and probably trusting to give you good tax advice. Asking the right questions will give you lots of good information about this accounting and tax professional.
What's the Difference Between a CPA an an Accountant?
An accountant deals with bookkeeping and accounting issues for individuals and businesses, preparing tax returns, advising business clients on financial issues, and auditing financial statements.
A CPA (Certified Public Accountant) is an accountant who has experience and education in accounting and has passed an examination to be certified by at least one state.
If you are looking for an all-in-one firm, a CPA firm is better than an accountant, because CPAs are qualified to do more, including representing you at a tax audit.
What Are Your Fees?
Ask how the firm bills clients and about billing options. Most firms bill on an hourly basis but firms will often have a monthly rate. Ask what's included in a monthly rate. One CPA might define it to be posting cash receipts and disbursements in accounting software while another might also include preparing monthly journal entries, balancing the bank statement, and printing a profit and loss report for you. Rates alone should not be the determining factor in hiring a firm; you just need to know what to expect.
What Services Do You Provide?
Most CPAs and accounting firms provide a range of services, from assisting with monthly bookkeeping to payroll processing/payroll taxes, to taxes and audit representation. If the firms have several professionals, each one will probably have a special area of expertise.
Can You Represent Me If I Get Audited by the IRS?
Ask if this person is qualified to represent you in an IRS audit. The IRS has two classifications of tax professionals:
Those with unlimited representation rights, including enrolled agents, CPAs, and attorneys. They can represent clients on audits, payment/collection issues, and appeals.
Those with limited representation rights are basically everyone else, including accountants who aren't CPAs. They can only represent clients whose returns they prepared and signed, and they can't represent clients on appeals or collection issues.
All CPAs are qualified to represent clients before the IRS, but not all accountants are. Also, ask how many tax audits this person has participated in. You may never be audited, but having someone on your side who knows what to expect with the IRS is a plus.
Disputes between taxpayers and the IRS go to Tax Court, a special U.S. court. Anyone who represents a taxpayer at Tax Court must be admitted to practice before the Court. Usually these individuals are tax attorneys who have a specialty in this area. You can represent yourself, but having a professional represent you will probably bring you a better result.
Do You Have Experience With My Kind of Business?
Ask about the experience of this firm with your type of business. Not all business types are handled the same from an accounting and tax standpoint, and having a firm that understands your field is very helpful. For example, if you are a healthcare professional (chiropractor, acupuncturist, physical therapist, psychologist, or other), your CPA should be knowledgeable about valuing equipment and accounting for patient receivables.
Can You Represent Me in All the States Where I Do Business?
If your business operates in several states, ask if the firm is able to practice in all states where you have a business. Many states have reciprocal agreements, but check anyway.
Do You Communicate by Email or Other Online Means?
Most professional firms use email and many use Zoom, teleconferencing, and other online services. If you have a firm that's not in town, using these services is essential. How you do business will be reflected in your preferences and those of your CPA.
How Often Should We Meet to Discuss My Business Taxes?
One of the primary purposes of having a CPA is for tax consultation. Ask how often this person recommends a meeting to discuss taxes. You should meet at least at mid-year after the June financial statements are prepared, and some firms recommend meeting every quarter. It is far better to pay a little more to meet several times a year than to wait until the end of the year and find that you have a tax problem.
What Are Your Tax Philosophy and Tax Planning Priorities?
Have a frank discussion about tax philosophy. Is this person cautious, assertive, or aggressive about taking deductions? A couple of good points to use as examples are travel expenses and home office deductions. Your CPAs style and philosophy should match yours. If you don't feel comfortable with this person's philosophy, keep looking.