A high quality CPA can help you avoid overpaying in taxes, getting audited, and losing a great deal of money. Federal and state tax laws change regularly, and the best tax advisors will be up to speed on those changes and how they can impact your finances. When looking for the best CPA near you, there are a number of qualities to look for. This post will guide you in finding the right CPA or accounting firm for your needs.
What is a CPA?
The term “CPA” is an abbreviation for “certified public accountant.” To become a licensed CPA, an accountant must meet specific educational and experience requirements, and they must pass the CPA Exam to legally provide tax advisory services in the state in which they operate. Furthermore, licensed CPAs must take continuing education courses in order to maintain their CPA license.
What do CPAs do?
Like other licensed professionals, CPAs may offer a range of services within their field, but generally, they have areas of expertise, such as personal or corporate tax. A licensed CPA can help with financial planning, filing taxes, investment advice as it relates to taxes (such as real estate and estate planning), conducting audits, analyzing financial statements, and more. Essentially, licensed CPAs help people to navigate the U.S.’s complicated tax codes.
How to Choose a CPA
The first step in choosing a CPA is getting clear on your objectives and specifically what you need help with. For example, small business owners may need help filing both their personal and business taxes. Other businesses may need help structuring their articles of incorporation and filing corporate taxes. You’ll want to find a tax advisor who has experience and even specializes in the areas that you specifically need help with.
You can find a list of CPAs, including CPA firms, who are licensed in your state at the National Association of State Boards of Accountancy (NASBA) website CPAverify.org. The site is a single-source, national database that includes licensed CPAs and CPA firms. In addition, the site provides information on non-compliance or disciplinary action against CPAs and CPA firms.
In addition, the IRS has a database of tax preparers who have IRS-recognized professional credentials and PTINs. PTIN stands for “Preparer Tax Identification Number,” which means the tax preparer is licensed to file your taxes for compensation.
Your tax professional will put their PTIN on your tax return, unless they are doing your taxes for free, in which case, they don’t need a PTIN. But generally, when using an experienced tax preparer, you will be paying them for their services.
IRS-recognized professional tax preparer credentials include:
- Attorney Credential
- Certified Public Accountant (CPA) Credential
- Enrolled Agent Credential
- Enrolled Actuary Credential
- Enrolled Retirement Plan Agent Credential
- Annual Filing Season Program Participant
What the Best CPAs Have in Common
When it comes to choosing a tax advisor, there are qualities to look for that the best in the industry have in common. Here is a list of attributes to look for:
- Licenses, Professional Credentials, and Associations
There are a few different types of licenses and credentials that tax preparers can possess. Essentially, you want a tax advisor with the right credentials for your specific needs. The IRS lists tax preparer credentials it recognizes, as mentioned above. Three of the most commonly used tax experts include:
- An Enrolled Agent (EA), who is a tax professional who is federally licensed and can practice without restrictions in every U.S. state. In addition, an EA can represent their clients in IRS hearings without restrictions.
- A CPA is an individual who can represent their clients at all administrative levels. While some CPAs focus only on personal taxes for individuals, others focus on business taxes, including financial statements. Generally, businesses should use a CPA because the CPA will be experienced in and will focus on helping the business reduce their tax liability.
- Licensed attorneys are individuals who earn licenses for the individual states where they’ll practice after they pass the bar for that state. Attorneys can represent their clients in IRS matters at every level. Ideally, if you are using an attorney to help with tax-related issues, you want one who specializes in tax law.
In addition, it’s a good sign when tax advisors are members of professional trade associations. This demonstrates that they want to stay on the cutting edge of their profession, that they like to stay up to date on new advances in their field, and that they’re eager to learn from and share knowledge with their peers.
Tax advisor professional organizations include:
- The American Institute of Certified Public Accountants
- The National Association of Tax Professionals
- The National Association of Enrolled Agents
- The American Academy of Attorney CPAs
- Experience Managing Your Type of Business of Financial Situation
Relevancy of experience matters greatly when choosing a tax advisor. While education and where they went to school is important, nothing beats experience when it comes to professional services. A CPA who has experience dealing with the IRS and working with individuals and businesses that are in a similar situation to your own will increase the odds that you get the best tax advice possible. For example, a CPA who works with startups or businesses going through mergers and acquisitions is going to have a different skill set than one who does estate planning for individuals.
When interviewing tax advisors, be sure to ask if they’ve worked on similar cases to yours. In addition, ask them how long they’ve been practicing. Sometimes new CPAs with less experience can bring a fresh perspective, but it’s still important that they have a few years of experience under their belt.
- Happy, Long-term Clients
A referral to a tax advisor from someone you trust is a great way to find the right professional for your needs. But even if you don’t get a direct referral, finding a tax advisor who has a book of clients who they’ve worked with for a number of years and who are happy with their work is extremely important. Some CPAs and tax firms are listed on review websites, such as Yelp, which can be a good source of third-party opinions of the CPA or firm.
- Reasonable Fees for Your Budget
A quality tax advisor can save you money in the long-term and keep you out of trouble with the IRS, but it’s important that the fees they charge are reasonable for your budget. Ask about hourly rates and fees upfront, even what they charge for answering questions via phone and email. Some tax professionals may charge a flat fee for filing your tax returns, while others may charge a percentage based on the assets they help to manage. Get clear on all fees before you hire them.
- Availability When You Need Them
During tax filing season, tax advisors become extremely busy, and the U.S. tax code operates around specific deadlines throughout the year. So, it’s important that the tax professional you select will have the time required to serve your needs, answer questions, and meet your deadlines. Be sure to ask them about their schedule and how much time they can devote to meeting with you while getting the job done.
Like choosing a surgeon, a general contractor, or other skilled professional, choosing a tax advisor is not something to be taken lightly. Generally, the more due diligence you put into the process, the better the odds will be that you make the optimal decision for your particular situation. By doing the legwork upfront, you’ll be laying the groundwork for a beneficial long-term relationship that will ease your mind, keep you out of trouble with the IRS, and provide financial benefit over the long term.