Choosing an Accountant or Tax Preparer

Headline:  Accounting Firm Owner Sentenced for Not Remitting Payroll Taxes to IRS.  This is one of the lead stories in Accounting Today from June 29, an online publication for accounting professionals.  A well-established, nicely credentialed CPA with a good practice in New Jersey will spend the next six months in prison for failing to remit payroll taxes withheld from employees in his own firm.

By all accounts, this is someone you would want working on your books and taxes.  He had knowledge, experience, skills, success—all of the ingredients of a credible professional.  Yet, he is a tax cheat.

So how do you choose a good accountant?

First of all, don’t choose based on location alone.  A recent survey showed that 75% of Americans choose their accountant based on convenience alone.  OK, there are lots of great accountants around here in Ashburn.  But there might be someone who is a better fit for what you need in Leesburg, Sterling, or Reston.

So you need to start by figuring out what you truly need, and then ask questions.  You wouldn’t go to a dentist to have an ingrown toenail fixed.  It’s the same with accountants.  All CPAs do not specialize in taxation.  I’m married to one.  Some specialize in corporate taxation, but can they also do a good job with your personal return?  Step One, then, is to match up the skill sets with what you need.

Next, ask around.  Who do your neighbors, co-workers, and friends use?  Personal referrals are powerful, and chances are that your neighbors may have similar situations as you.  If they are happy, then you have a good chance of success as well.

Third, make your accountant prove credentials.  All tax preparers need to have a license number issued by the IRS.  That does not in any way mean that they are certified or otherwise qualified to do this kind of work.  It just means that they paid some money for an identification number.  Only attorneys, CPAs, and Enrolled Agents are authorized to practice before all administrative levels of the IRS.  Of those, only the EAs are licensed by the IRS directly.  The rest are licensed by the states.

Google your prospect.  You might be amazed at what you find, both positive and negative.  Check disciplinary records.  Has the person been sued?  Why?  What was the outcome?  What is this person’s reputation in the community?  Do they take pains to stress how honest they are?  (That’s a big red flag!)

Fifth, learn the accountant’s practice.  What happens if your person is on vacation, sick, or worse?  Is the firm open all year?  How do they handle notices from tax agencies?  Who is the support staff? What are the policies and systems for protecting sensitive client data? Are background checks done on all staff?  What kind of clients does the firm work with?  How do you stay current with all of the tax law changes?

Notice that fees aren’t mentioned anywhere above.  Sure, they’re important.  But this is definitely a business where you get what you pay for.  There are plenty of $30/hour bookkeepers and tax preparers out there, and as long as there are, those with better education, more experience, and greater knowledge will thrive.  Plus, let’s say your household income is $100,000, pretty average for this area.  Even a preparer who charges $500 for a good, thorough return is only charging you a half of a percent of your income.  Isn’t that a small price to pay for someone who knows what they’re doing and who will stand behind their work? 

A good, reputable accountant will take the time to meet you in person and answer all of your questions, but the ultimate responsibility is yours.  Do your homework.  Don’t just pick the first name the search engine pops up.  Ask question after question, and when you think you’ve asked it all, ask some more.  There is a lot at stake here.  Mess up your taxes and it could cost you thousands of dollars to fix.  Bring in a cheap “bookkeeper” and the result could be the same.  Take the time to do this right, and you’ll find that with the right accountant on your team, you save much more than you spend.