If you're running a small business, you gotta have a solid accountant. Someone you can trust and who you can call on for advice and counsel will help save you time, money and energy spent in stressing out. So what are the top things you need to look out for?
There are different layers when it comes to taxes: there are income taxes at the federal, state, city and county levels, sales tax and payroll taxes, just to name a few major ones.
As long as your accountant understands the tax laws that apply to your business, their physical location doesn't matter - on the one hand.
On the other hand, you might find it helpful and useful to be able to sit across from your accountant and see each other eyeball to eyeball. Everyone needs to file their taxes, therefore everyone needs an accountant, therefore, accountants tend to be busy. Being able to get together can ensure that you'll get some focus and attention from your accountant when it comes to preparing and filing your returns.
Fun fact: The IRS doesn't have any laws that require that an accountant must file your taxes. So anyone can file your taxes for you. Maybe you've filed your own taxes or you've had a friend who loves to nerd out on accounting help you file.
If your taxes are straightforward, i.e. you have a single W2 form and you're single and don't own a home, it might be appropriate for a non-accountant to file your taxes for you. But as a freelancer, and especially a small business owner, having someone who understands the ever-changing tax code can be helpful. A CPA (certified public accountant) or EA (enrolled agent) could save you time and money.
If you ever have the unfortunate experience of being audited, a CPA or EA can help you navigate through this. Better yet, they'll be scrutinizing your tax return to make sure that your return doesn't raise any red flags that put you at risk for being audited.
It's helpful to find someone who understands your industry. If you're an artist or actor, you should work with an accountant who is well-versed in that area of the tax code. That person will already have accumulated expertise and will be keeping up with the changes.
Accountants can provide different services. Here are a list of common services they provide:
- Preparing and filing your state and federal taxes;
- Monthly, quarterly or annual bookkeeping;
- Preparing and filing your sales tax filing (if you collect sales taxes);
- Setting up payroll;
- Filing your payroll tax returns;
- Providing tax counsel and strategy;
- Financial analysis.
Each accounting firm can bill for its services differently. Some firms bill a flat rate based on the type of tax return you'll be filing. For example, a personal tax return that is relatively simple and straight forward will be billed at a flat rate of $300 - $600. Solo accountants and small firms often operate in this way.
Bigger accounting firms might charge an hourly rate or charge a quarterly retainer. So each time you reach out for tax advice or your accountant prepares filings for you, you'll be billed their hourly rate.
Each accountant or accounting firm can operate differently. Some firms will work entirely through email, sending you your returns in PDF format and requesting documents to be uploaded to a client portal.
Some accountants will have you sit in their fancy office twice a year. When finding accountants, understanding their workflow is important.
Are they going to ask you to send printed bank statements or a google sheet? Will they send you paper returns or can you file electronically? Will they review your bookkeeping? Are they comfortable using the bookkeeping program you want to use or are using?
Interview Your Options
Speak with different accountants and understand how their business works, whether or not they have experience in your industry and what their fee structure is. You should feel comfortable with the firm or person you're working with.
Accounting firms can be as small as one person and as large as thousands. You should understand who you'll be in contact with and how communication will work.
Make sure you're comfortable with the person you're going to work with and that they provide the services you're looking.
A good accountant will help you grow your company, work with you to help you understand how your finances are impacting your business and play a vital role in managing the complex financial work. Having an experienced, trusted and motivated accountant in your corner will without a doubt save you time and money in the long run. The best ones will play a vital role in the growth of your company.