Questions to Ask When You Choose a Tax Accountant
If you are considering early exercising of a significant number of options or are thinking about selling options in the public market for the first time we highly recommend retaining a reputable tax accountant. We realize this means you will incur a fee, but it is highly justified given the risk you take on incurring significant unforeseen taxes if you don’t consult a great tax accountant. It is not as easy to quantify the savings from hiring a tax accountant as it is from hiring an estate planner (see our recent post by Abe Zuckerman regarding Estate Planners), but it’s just as necessary. Like most people, you’re probably not sure how to choose a tax accountant.
Do they have expertise in areas relevant to you?
If you work for a technology company that issues stock options or RSUs, then make sure your accountant has worked with plenty of other clients in the same situation. Better yet, make sure she has clients who work in more senior positions than you because with seniority usually comes more complexity. A true professional will tell you if she is not appropriate for the job, either because your return is too simple to warrant her help or too complex due to her lack of relevant experience (a common example where a lot of experience is needed would be the area of oil and gas partnerships).
How many years of individual tax experience do they have?
An appropriate tax advisor should have a minimum of five years experience doing individual tax returns. Experience with a large firm is usually better than a small firm because she will have been exposed to a broader set of issues and her training should be better.
What license(s) do they have?
It would be preferable for your tax preparer to have a CPA (Certified Public Accountant license) although it is not technically required. Tax Attorneys should have a LL.M in Tax (an advanced tax degree for an attorney).
Do they have an advanced degree?
A CPA can do tax work even if she hasn’t had any special training in tax. I know that sounds crazy. That’s why it might make sense to look for someone with more advanced training like a tax specialty within an MBA. My tax advisor, Bob Guenley (who has written a number of guest posts for us), told me he only took one tax course in college and learned a lot on the job, but getting his MBA in tax made a whole world of difference. His MBA included individual, partnership, corporate and fiduciary tax, which is more than one needs if she wants to specialize in individual tax, but it’s awfully nice to have someone advise you who has that broad perspective. An advanced degree isn’t necessary if your accountant has taken advanced classes in personal tax as part of her ongoing Continuing Professional Education requirement. There is no correct answer to this question. I just think your tax advisor/preparer needs to have taken several courses emphasizing personal taxes.
Choosing an accountant
When choosing an accountant, look for one that will suit you or your business. Some accountants specialise in tax returns for individuals or for businesses in a particular industry, and others are experts in a particular area of tax.
If you’re an employee
An accountant can be useful if you have multiple jobs or income from investments. They can also help you claim all the tax deductions you’re entitled to and make sure your tax return is correct.
If you work for yourself
If you work for yourself as a sole trader, contractor or freelancer, an accountant can help. They can help with your BAS (business activity statements) and PAYG (Pay as you go) instalments. They can also tell you what deductions you can claim, and give advice on super contributions and tax.
Help with your business
If you run your own business, an accountant can help you set up and maintain your financial records. They can also help you meet your tax obligations.
Finding the right accountant
A good place to start looking for an accountant is recommendations from people you know.
Q&A: Choosing an accountant
How important is it to find the right accountant?
Really important, if you take the time to find a good accountant, it could save your business a lot of time, effort and money.
And if I don’t find the right accountant?
Some accountants are only interested in the fee, others can be too busy to give you the service you need, which means your business suffers, which can include paying more tax than you need to. No matter how new or established your business – or how small it is – if you’re paying an accountant, you should receive a first-class service, otherwise, what’s the point?
How important are the personalities?
Much can rest on the characters involved. There needs to be a professional, yet friendly and open relationship between the parties. A few years ago, the accounting firm of which I’m a partner picked up a new client, who immediately referred us to her friend. The relationship with the first client soon broke down – we always seemed to be on a different page. The lady she referred is still a happy client.
What can an accountant help me with?
PAYE, VAT, personal tax, business tax, year-end accounts, returns – tasks that many business owners find difficult or just plain boring. Not everyone’s good with figures, while trying to do it yourself could in fact prove much costlier than paying an accountant to do it for you. From a tax perspective, the business is also properly administered, which gives piece of mind and frees up the owner to do other things. To use a medical analogy, what you should be looking for is a good ‘GP’, with links to a ‘specialist’ if you need one.
Do you recommend monthly fee arrangements?
Only if you’re paying your accountant for monthly services. Better to pay as you go, then you can see what work your accountant has done. You can reduce your accountancy fees by doing your own simple bookkeeping and keeping an orderly record of your expenses, of course.
How to select the right accountant
Finding a good accountant is difficult, especially one who understands your business’s unique needs. Here is how to select the right accountant for your business
Full time, In-house or outsource
As a small/medium business owner, cost is the key consideration. You may not need a full time accountant. There are many accounting firms out there that provide accounting services and this could be just the right solution for you. However, you need to choose the accounting firm that you can trust with your financial information and someone whom you could work with in the long run
Relevant experience, certified or chartered accountant
Ensure that your accountant is certified by a professional body, i.e. CPA (Certified Public Accountants) or CA (Chartered Accountants). It is preferable that the account should also has the relevant experience working in a similar business to yours or at least has experience in in the same sector as yours. This is to help ensure that your accountants understand your business unique need sand, can set up your company right from the start and able to serve well as the company grows over time.
Be clear on his/her role and responsibilities
As mentioned above, the Accountant has a wide range of responsibilities. Ensure your accountant has the necessary skill and experience to help you with current and future needs. Any simple accounting task that can be done in house will reduce accountant costs and will also give the business a better grasp of the company’s financial situation in real time and a heads-up on potential issues. These include book keeping, payments and collection.
Accounting software, offline or online?
If you decide to engage a third party accountant, your accountant’s software may play part of your selection process.
tips on choosing an accountant for your start-up or small business
Most small business owners say that their accountant is their most valuable advisor – a good accountant will keep your books in order, help with tax planning, and will ensure that you meet all your tax deadlines
Consider choosing an accountant before you start your business, or as soon as you can, as they will be able to advise you on start-up expenditure, how to register with the tax authorities,
Ensure that all prospective accountants are fully qualified. Most firms are members of a recognised accountancy body such as the ICAEW (Chartered Accountants), ACCA (Certified Accountants), or ICAS
Make sure your accountant has experience of dealing with other small businesses, particularly other businesses within your industry. If you are a contractor or freelancer, for example, you will typically be better off taking to a specialist accountant rather than a ‘general’ firm
Find out what fees your accountant will charge. Are they annual fees, or monthly? Are there any entry or exit fees? How much will extra work be charged at – if it falls outside the agreed tasks to be performed for your business?