How to choose the right tax accountant
Each year millions of taxpayers choose whether to file their taxes with a tax professional or do their taxes themselves by various DIY (Do it yourself) tax preparer software. But for the focus of this article we will be talking about the taxpayers who choose to file their taxes with a professional. Individuals have lots of options when looking for a tax professional so where do they begin? What does a person look for in a tax preparer? Many individuals think that if they choose to have a professional file their taxes then they have to have a Certified Public Accountant or CPA prepare and sign their tax return. This is simply false and most taxpayers are no aware of this. Small business taxpayers are even more likely to file their taxes with a CPA because they think that this is the Gold standard or best option or they are more knowledgeable than every other tax professional out there but this couldn’t be further from the truth. First, lets talk about when you should seek out a CPA. Most CPAs work for medium to large companies for starters and most CPAs that work for a particular company or corporation in a certain state is not the state where they obtained their CPA license. Therefore, if this is the case than ethically a licensed CPA that is not practicing in their state where their license is active ethically cannot even put the letters CPA after their name on correspondence or otherwise. So there are even less CPAs that are licensed in their home state that work for a particular corporation. That is why they are paid more than others because corporations are required to have a licensed CPA in that particular state sign the tax return. Also in the case of external audit the corporation needs a licensed CPA. The point is that if you are an individual or small business taxpayer, you absolutely do not need to have a licensed CPA prepare and file your tax return. There are other very qualified tax professionals out there that are more than competent that can prepare and file your individual or small business tax return. Additionally, did you know that most CPA firms hire non CPA and non-credentialed tax preparers that work for them actually do the work to prepare and file most of the tax returns for the firm? They charge you just as if a licensed CPA did all the work but in fact they did not.
All they do is use one of the partner’s name and credentials or main shareholder of the CPA firm and it’s a marketing tool to lure you in. In fact some of the biggest and well known CPA firms in the country use undesignated tax preparers and are among their best talent. My father was a President of a hospital network for over thirty years and one of his main responsibilities was hiring medical doctors. He told me about one time that he interviewed a doctor that obtained his medical degree from Harvard Medical School and the guy could barely communicate effectively. He told me that it was the person rather than the degree pedigree. I’m not saying that you do not have to be smart to get in to and graduate from Harvard.
. All I am saying is that there are many successful people in the world that have done extraordinarily well for themselves and either graduated from a college or university that nobody has ever heard of, is not top tier, or they do not even have a degree. According to the website bustle.com, there is an extensive list of very wealthy and successful people who graduated from very mediocre universities by other people’s standards like: Oprah Winfrey – she went to Tennessee State University, David Letterman – Ball State University, Steven Spielberg – Cal State University, Long Beach, Lyndon B. Johnson – SW Texas State Teachers College, Ronald Reagan – Eureka College in Illinois. I guarantee you that most people have never heard of these colleges and universities but there are some very wealthy and successful people on this list. Here is a list of wealthy individuals who don’t even have a college degree: Mark Zuckerberg – Founder of Facebook, Bill Gates – Founder of Microsoft, Steve Jobs – Founder of Apple, Richard Branson – Billionaire and founder of Virgin and the list can go on and on. According to the IRS at IRS.gov, any tax professional with an IRS Preparer Tax Identification Number (PTIN) is authorized to prepare federal tax returns and this is also true in most states. Additionally, I personally know many CPAs that are not even familiar with federal or state taxes. They solely focus on accounting. That is why Fortune 500 companies have tax departments. They have a completely dedicated department of professionals that specialize in only tax.
There are different types of tax as well. One professional may be specialized or familiar with sales tax while another may be more focused on federal tax or international tax. When I worked at Office Depot in the tax department in 2010, I worked closely with an accountant who was a CPA and when I would ask him tax questions he would always say “I don’t know, you would have to speak to this particular person in the tax department”. Also, just because someone is an expert in a certain area of expertise still doesn’t mean that they are a walking encyclopedia. The US tax code contains 6,871 pages so there is no human that can possibly have that much information in their head, be familiar with every topic or have that much information on the tip of your tongue. The fact of the matter is that any topic varies in complexity and may take some research to become familiar with and provide an accurate answer.
CPA
In my experience as an accountant or tax accountant, many prospective clients expect you to be familiar with a specific topic even if it’s complex and have that information top of mind and this expectation is absurd. You can go to a medical doctor and one may specialize in the heart or one may specialize in bones. Why would it be any different with a tax professional or accountant? So I’ve talked a lot about not needing a CPA to prepare and file your taxes so what do you look for in a tax preparer or accountant and how do you find this person?
- Search the web for an accountant or CPA near you
- Call 3 or 4 different professionals and either meet with them virtually or in their office
- Ask him or her what their onboarding process is like and ask them other questions you may have
- You need to get a sense of comfort or ease of good feeling from this person
- Ask them how much experience they have in taxes and accounting – ask them about their background
- Ask them about their memberships and credentials
- Ask them to review or audit your previously filed tax return – most professionals will do this at no charge
- Look at their reviews on the web and read them – these reviews will tell you a lot about the type of relationship you are about to get into
- Look for a small firm or a one- or two-person accountant firm
- Ensure their software and apps are reputable and able to keep your personal information secure
There are many other considerations here, so this is not meant to be a comprehensive list, but this is certainly a good starting point. Choosing an accountant with a diverse background also shows that they are capable and intelligent. Preparing tax returns and providing tax solutions is like putting together a puzzle and you need to find a person that is good at research, is analytical, and good at figuring things out or problem solving. These are skills that are inherent in nature and can be honed but not taught. Either an individual is resourceful, or they are not. A person who you ask a question that may not know the answer but must research it or look further into it has integrity and is more intelligent than a person who tries to wing the answer in my opinion. Also, an individual who has a diverse accounting and tax background has been exposed to many different areas and has had to learn many different topics so in essence exercises his or her brain more frequently and has also expanded their knowledge base. They are also more apt to figure things out and do things properly and accurately. Make no mistake, most individuals are not like this. There are many incompetent professionals out there in any profession, particularly in the accounting and tax arena. Doing proper due diligence on hiring your next tax person or CPA should not solely rest on credentials or licensing. Like any profession there are exceptional licensed professionals, there are mediocre ones, and there are not so good ones.