how and why to hire a CPA as a small business owner

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Whether you own a small business, earn money through a side hustle, or just grind that 9 to 5, you might want to hire a CPA. Especially if accounting, tax, or finance are not your area of expertise.

While TurboTax and other software programs are meant to make the tax process easier for the everyday person, those programs aren’t always intuitive and they might be missing tax guidance you could benefit from.

FREE downloadable list of questions to ask a CPA is available at the end of the post

If you’re starting a small business, I do recommend working with a CPA for a multitude of reasons.

• Tax laws change way too frequently for the everyday person to keep up with. Plus, it’s tedious and boring (in my opinion and accounting is my background!). A CPA will keep up with the tax law changes and can advise you on advantageous opportunities to reduce your tax liability.
• When filing for an LLC or other tax status, a CPA can be selected as the Registered Agent which helps to keep your personal information off a very public database. CPAs will usually provide this service free-of-charge if you’re already their tax client. A Registered Agent is required to accept legal mail or documentation on behalf of the business. They might also help with your annual state registration (if applicable).
• If you’re looking to branch out into another business or side hustle, your CPA can let you know how that might affect your current financial situation in relation to taxes.
• Bundling services is always helpful when accounting and finance aren’t your specialty. Hiring a CPA can allow you to focus on growing revenue rather than worrying about bookkeeping, payroll, tax returns, W-2s, 1099s, etc.
• PEACE OF MIND – The scariest Federal agency is the IRS and I wouldn’t tangle with them. It can be easy to mess up a simple tax return and the bookkeeping for it. While final responsibility for a tax return is still on you, a CPA is helpful oversight to make sure your return is accurate.

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If you own a business, here’s the tasks I wouldn’t recommend hiring out to a CPA:

Every task! With their sales pitch, it may be extremely enticing to dump everything related to business financials on a CPA’s plate and just focus on what you do best – running your business.

Without some control and oversight with your finances, you’ll completely lose all understanding of how well your business is functioning.

No other person will care as much about your business as you do. The same goes for a CPA even if she’s the most perfect and knowledgeable CPA in existence.

At the very least, I recommend holding on to:

• Bill paying. You need to know where the cash is going in your business.
• Invoicing. You need to know where your cash is coming from and be aware enough of the process to answer questions from customers.
• Bank and credit card reconciliation. Even if your CPA’s firm is doing this for you, I recommend reviewing your bank and credit card accounts yourself. This way there’s proper oversight over what’s going in and out of the business.

Losing insight into your business finances will ultimately hurt you if you don’t know the daily, weekly, and monthly cash inflows and outflows beyond just looking at a bank or credit card statement.

What not to (typically) expect out of your CPA:

• Instantaneous turnaround on questions or requests. CPAs have a multitude of clients they’re working for at any given time (especially dependent on the time of year and tax season!). While hearing back in some form within 24 hours should be expected, you may not receive a full answer in that response. Your question or request may require additional research which will increase the turnaround time.
• Caring about operational metrics or financials. CPAs are focused on taxes (unless you’re paying for an additional service) and are concerned with Year End (YE) numbers rather than day-to-day or month-to-month financials. If you’re in need of operational data setup and analysis, consult a Financial Analyst or see if your CPA offers that service.
• No work on your part. CPAs are putting together a tax return based on the information you provide to them. Their work and analysis is only as good as what you provide them.

How to find a CPA:

• Ask friends, family, and neighbors! Recommendations from those you trust are always top in my mind. They might also be able to tell you who to steer clear of!
• Google! Trusty Google can help you find who is in your area. Ignore reviews on their websites and read the Google Business Profile reviews instead.
• Check your state’s Board of Accountancy online. Not only will they provide a list of CPAs in your area, but there will also be a list of CPAs with disciplinary action taken against them.
• Ask on Facebook local groups. Sometimes the community just knows. Again they also might dish on who not to work with.

Questions to ask to hire a CPA

Once you start calling CPAs, sometimes you’ll reach one or you’ll speak with a receptionist or assistant. You may not get answers to all your questions depending on who you speak with.

I always start the call with who I am, ask if they’re accepting new clients, and if I can ask a few questions.

Asking the same questions to multiple CPAs will help you understand your options and which CPAs you’d like to meet in person.

Sometimes you’ll find that a phone call is good enough for you to feel comfortable in hiring a CPA. Other times you might want to narrow the list down and meet with them in person.

This shouldn’t be an issue for the CPAs dependent on the time of year. Don’t expect this to happen at Year End or around major tax deadlines. Plan your search in a timely manner.

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Here are a list of helpful questions to ask potential CPAs:

Do you have other clients in my industry?

It’s always helpful and more efficient when a CPA is familiar with your industry. They’re more likely to have ideas and strategies to decrease your tax liability if they’ve encountered the same issues with someone else before.

This doesn’t mean that a CPA couldn’t do a great job if they have no one else in your industry, but it does help.

Can you handle my payroll, W-2s, 1099s, bookkeeping, taxes, advisory, etc.? Is a bundle of services discounted?

While you don’t want to outsource absolutely everything to a CPA (you’re still responsible in the eyes of the IRS), bundling services with your CPA can be useful for time and cost savings. A one-stop-shop can make life easier.

Who will I work with? With an assistant or the CPA directly?

While you may speak initially with a CPA, you might eventually only interface with an assistant or the receptionist. Not interfacing with the CPA in each interaction isn’t necessarily bad, but you want to make sure that open lines of communication are still possible in the future.

What’s the process for providing tax documentation? Can I email them, upload them to an online portal, or provide a hard copy?

In your initial consultation, you’ll want to bring hard copies of the last few years of your tax return for the CPA to look through. Going forward nowadays most CPAs have an online portal that you can upload documentation to or you can email it to them. Hard copies are not typically provided to CPAs anymore because working through those is inefficient (and more cost to you!).

What’s the turnaround time for tax returns?

There is no set turnaround time benchmark so this question is more so to hear their response and see their thought process and expectations.

CPAs are ridiculously busy during tax season and at times they may ask to file an extension on your return. The better prepared your tax documentation is, the faster they can work through your tax returns. Make things stupidly clear in documentation to make everyone’s life easier.

The earlier you turn in completed documentation may also mean your tax return is finished earlier in tax season as well.

Can I ask (call/email/visit) for advice throughout the year? Will this be billable?

To make sure your year end tax documentation is accurate, I recommend keeping up with your bookkeeping monthly if not weekly. And while you’re doing this you’ll inevitably come across scenarios where you’re not sure how to proceed. That’s ok! This is where your CPA comes into play.

Some CPAs do charge you each time you meet with them or have a question. Others don’t. Your comfort with either option is up to you.

But no matter what, your CPA should be available for questions year round (within reason). Any other answer is a red flag.

How many historical years of tax returns are needed? Soft or hard copy?

Your CPA will want to see historical tax returns to confirm they’re including everything necessary in your current year tax return. Reviewing this information can also help them advise you better on tax liability mitigation.

On your first visit they may want to see hard copies to review with you or they may request that you email them soft copies.

What’s the initial set-up/turn-over process like for financial information?

Depending on all the tasks you turn over to your CPA, they may require lots of different documentation or access to accounts. Ask them how this process goes so you’re prepared and can start pulling all that for them as soon as possible.

Do you e-file taxes?

E-filing taxes is the most efficient and accurate way to file taxes. It takes less to time to understand what went wrong, if something went wrong.

E-filing results in almost instantaneous feedback from the IRS with the most complete and accurate tax return possible due to software checks.

Will you sign my tax return and represent me if the IRS comes knocking?

Confirm that your CPA is comfortable with and will represent you if the IRS comes after you for mistakes in your tax returns. If they won’t, find a different CPA.

When do you want my tax information by?

Because busy season is so taxing (ha), you’ll want to make sure you get your complete and accurate documentation in as early as possible. This way your CPA can tackle your return as soon as possible and there’s less stress for you.

Try to send all your tax information at one time and make sure it’s accurate! The more times your CPA and staff touch your return, the higher the cost to you typically becomes.

What’s the turnaround time for questions or requests?

This will vary from season to season, but they should be able to provide an average turnaround time for questions.

At the bare minimum, they should indicate receipt of your email, call, or question and that they will get back to you with an answer. Anything else is unprofessional.

Will you provide tax advice for new or existing laws that can reduce my tax burden?

This is really the big reason to hire a CPA. You can muddle your way through filing taxes with a software program, but what you can’t keep up with is the constant changing tax code.

CPAs should definitely be on the lookout for changes in tax laws that could help mitigate your tax liability.

How will I be charged? By an hourly or a standard rate?

Typically CPAs charge by the hour, but sometimes you’ll find one that charges a set rate. Keep these options in mind when you have questions throughout the year or you want to increase the tasks they handle.

What are the biggest issues or missed deductions you typically see for my type of business?

Go ahead and ask this question in your initial introduction to see how knowledgeable they are regarding your industry. This can also show how well they handle not knowing something (if they don’t have an answer) and how well they follow-up with you (if they even do!).

What else do I need to know that I’ve not asked?

Hopefully they will have something else to offer to the interview beyond your questions. This gives them that opportunity.

once you’ve hired a CPA

Once you’ve hired a CPA, make sure you turn over the required documentation as soon as possible for them to review. Keep good records throughout the year to make Year End financial summaries a breeze. Turn over tax information as soon as you receive it all completely to ensure timely turnaround on your tax return.

And continue to watch all that your CPA does. They’re only human and you are the beneficiary and receive the ultimate responsibility of their work.

The IRS doesn’t care if you didn’t personally complete your tax return, you are still responsible. This makes hiring your CPA an extremely important task.

If you have any questions regarding hiring a CPA or bookkeeping, drop a comment below or email me at Jamie@ardaacres.com. 

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