Does the thought of doing your taxes totally bum you out? Late nights combing through Turbo Tax and Google, trying to figure out if that one random deduction actually applies to you. Hitting Submit unconfidently and crossing your fingers that you didn’t screw something up.
Well, good news! There is a super magical person that can do all that combing and submitting for you- a CPA or Enrolled Agent.
What’s the different between a CPA and Enrolled Agent?
A CPA is a certified public accountant who has taken an exam. While they can file your taxes for you, they can do so much more, like advise you on your business finances.
An enrolled agent is someone who is licensed by the IRS to file your taxes. A really good enrolled agent can also advise you on your business finances from a tax liability standpoint.
So how do you get your hands on one of these magic beans? The first step is to ask your colleagues who they use to prepare their taxes. Personal recommendations are always the most reliable. Then, after you have 2-3 possibilities, begin interviewing people.
Yes, you actually want to interview people. These are your taxes (which probably stress you out) and interviewing helps you find the BEST person for your business.
Here are 8 essential questions to ask when looking for a CPA or enrolled agent (note, for the purpose of readability I’m using CPA and Enrolled Agent interchangeably here):
Ask a potential CPA:
What types of business structures have you worked with?
This crucial question ensures that you are hiring someone that understands the needs of your business structure. For example, if you are a sole proprietor and interviewing someone that primarily works with S-Corporations, then it is likely not a good fit.
Ask what percentage of their clients have the same business structure as you do. It’s okay if it’s not 100%- just make sure it isn’t 1%!
If the CPA works with a mixture of business entities, that’s a good sign. That means that your CPA can grow with your business and help you if you decide to change structures somewhere down the line.
Do you have clients in my industry?
This is one of the most important questions to ask a potential CPA. You def do not want to hire someone who only works with automotive shops when you run a cupcake bakery. Try to find someone who at least has some connection to your industry.
For example, maybe the CPA doesn’t work with another cupcake bakery but they do have a client who owns a restaurant or cafe. This indicates they understand the food industry.
This question helps you avoid spending a bunch of time educating your CPA about your industry. You are hiring this person to educate YOU about your taxes and finances- not the other way around.
Are you available year round?
Some CPAs only work during tax season and then pack up shop for the next 6 months and head to the tropics. I highly recommend you find a CPA who is available year round.
If you’ve been in business for a while you know that not everything goes as planned. There may be times that you need to call upon your CPA for small or major advice and you don’t want to spend a bunch of time tracking them down in a bungalow in the Bahamas.
What additional support do you offer outside of filing taxes? (as in can I call you on you when I’m making decisions about my business that will affect my tax liability?)
Another supercalifragilistic question to ask! Will this person be there for you when you need to make big decisions about your business? Are they willing to offer you advice that will help you save money?
Here’s an example- a few years ago several of my clients converted to an S-Corp at the bequest of their CPAs who noticed that they could save money on their taxes by changing the structure. The next year these clients saved $8,000 on their taxes.
Had their CPAs not been actively engaged in their personal well-being they wouldn’t have saved this dough.
Ask a potential CPA what types of business advice they give their clients? What types of business advice can you ask?
Read between the lines with this one- does this person seem pro-active or complacent? Do they have concrete examples of times when they have offered advice in their client’s best interest?
How much does a return cost and how do you bill for your hours?
Some CPAs will charge you a flat fee for a return, while others bill hourly. If someone charges a flat fee, get a breakdown of what’s included in the fee and dig deep for specifics.
Followup questions are:
[wc_fa icon=”arrow-circle-o-right” margin_left=”” margin_right=””][/wc_fa] How many hours of phone support are included? How many in-person meetings?
[wc_fa icon=”arrow-circle-o-right” margin_left=”” margin_right=””][/wc_fa] What is the fee structure if there is an error on the return?
[wc_fa icon=”arrow-circle-o-right” margin_left=”” margin_right=””][/wc_fa] If you need to call or email them during the year, what is the fee structure?
Be sure you understand all the differentiations in their fees. You don’t want to hire someone who sounds really affordable, only to find out later you are being billed $100 for every email they send you!
What do you need from me to file my taxes and what is the timeline?
It’s important to know this information before you hire a CPA so you can gauge your time commitment. Some CPAs just want a report while others want access to your accounting software. Depending on what your CPAs needs, and what are able to provide, it may or may not be a good fit.
Check in about the timeline for filing your taxes. When do you need to have your information to the CPA? What is the turnaround time for a return? How many meetings do you need to have?
Consider the person’s timeline and if it seems reasonable and like something you can commit to.
Do I like this person?
Do you remember that episode of Sex and the City where Carrie meets that handsome doctor on the beach in the Hampton’s who is wild about her and she just isn’t into it? They called him the “good on paper” guy.
There are a lot of good on paper CPAs who will make a wonderful CPA for someone out there. BUT just because a CPA is good on paper doesn’t mean you should hire them. You should hire someone who is good on paper AND you like.
Why do you need to like your CPA? Because you have to work with this person every year around a topic you’re already dreading. And if you’re dreading working with your CPA then every year filing your taxes is going to suck.
Make filing your taxes less sucky by hiring a CPA you actually enjoy working with.
Do I feel comfortable discussing my finances with this person?
Your CPA is going to get down and dirty under the sheets with your money, so be sure you aren’t going to wake up the next morning with a hangover and the realization that you’ve made a terrible mistake.
Do you feel judged by the CPA? Ashamed of your money situation? Tempted to lie?
If the answer is yes then don’t hire this person! A CPA is like a doctor for your money. You want a doctor you can be honest with about those late night cheese puff binges and the pint of ice cream you consumed for breakfast. You want a doctor who is always looking out for your health- in the kindest way possible.
Now replace the words doctor with CPA and health with money. Does this sentence ring true for the person you are talking to? If not, it’s time to pick up the phone and try again.
There you have it- 8 questions to help you find the most bad-ass CPA for your business. Good luck and good hunting!