Little did you know, but regular meetings with a tax accountant will help keep on top of your taxes and financials.
Many people would agree that filing their own taxes is one of the most challenging things to do. That is why they prefer hiring a tax accountant instead of doing financial tasks and tax filing on their own.
In case you are having troubles with your taxes or want to enter selling options in the public market, hiring a reputable tax accountant is worth considering. If not, you might incur significant unforeseen taxes.
If you are ready to make a tax accountant part of your financial decisions, consider the following questions to ask when choosing the best one.
Do you have expertise in the area related to me?
For instance, you belong to a technology company known to issue RSUs or stock options and ensure that the accountant has working experience with plenty of clients in the same scenario. You also need to ensure that he or she has clients working in more senior positions than you. That is because seniority is equivalent to more complexity.
Trustworthy professional accountants will tell you whether or not they are appropriate for a specific job. That is because your return is too complicated due to a lack of relevant experience or too simple to warrant their help.
What license(s) do you have?
Part of choosing the best tax accountant is identifying which license(s) he or she holds. Mind that there are three license types: CPA, EA, and Tax Attorney.
Certified Public Accountant (CPA)
Known as the highest level of an accountant, A CPA refers to the tax adviser who has passed the strict CPA exam. He or she met the work experience requirements for receiving the licensing by the state.
Enrolled Agent (EA)
An enrolled agent refers to the tax practitioner who is licensed at the federal level by the IRS. He or she is highly trained and should pass the three-part Special Enrollment Examination. That exam covers all the tax code aspects and requires to showcase proficiency in individual and business tax return preparation and federal tax planning.
Holding a law degree, a tax attorney specializes in the tax preparation legal side. He or she is skillful in tax planning and knowledgeable in asset structure and tax liability. The case of a tax attorney who specializes in estates and trusts can help you with the proper wealth transfer arrangement.
How many years of individual tax experience do you have?
A tax accountant must have five years of experience performing individual tax returns. It is also better to find an accountant with a large firm background than someone who worked in a small firm. That is because he or she has better training and has been exposed to broader issues.
Do you have any advanced degree?
Without any special tax training, a CPA can perform a tax work. That is why looking for a tax accountant with more advanced training makes sense. You can search for someone who specializes in tax within an MBA.
A tax accountant can have MBA that includes fiduciary, corporate, partnership, and individual tax. While you may need someone specializing in individual taxation, it is still better to have an accountant by your side with a broad perspective.
Will you represent me if I am audited?
A reliable tax adviser will stand by his or her tax return. He or she will represent you in case you are being audited. Mind that when he or she represents you, an additional fee is involved. If he or she is reluctant to get engaged on this issue, it’s a red flag for you.
Will you review my past tax returns free of charge?
A professional tax accountant should review past tax returns at no charge because it only takes as little as fifteen minutes to determine if he or she is comfortable or not preparing your return. As for advanced cases, it takes thirty minutes.
He or she should ask you to send your previous returns in advance of your meeting. That way, the two of you can spend the entire meeting more productively.
What fees will you charge?
It is fair for a tax accountant to charge you hourly. Beware that the hourly fee varies by location. For instance, in Bay Area, a senior advisor coming from a large firm may charge you $600-$700 per hour. However, if he or she is from a small firm, the charge would be half of that.
If the tax advisor spends an hour with you discussing your tax document preparation and an hour reviewing your returns along with a lower cost staff who will handle the data input and software operation for return calculation, expect to pay $1,000-$1,5000 at a small firm or $2,000-$3,000 at a large firm.
What can you do to help manage my cash flow more effectively?
Ensure to ask the tax accountant to help you understand the cash flow, make plans, and analyze problems to manage it better. He or she can point out any cash flow tendencies that you might usually overlook.
What can I do to keep my fees down?
If you are a good organizer, your accountant will have less time searching for information to translate to lower fees. If you are a business owner, it is better to send him or her a spreadsheet or QuickBook files containing all your expenses and income.
Are you comfortable working with the prospective tax accountant?
Beware that you may encounter plenty of tax-related decision-making in the long run. That is why you need to ensure that you are comfortable working with him or her. Since tax codes are not always logical, you have nothing to worry about asking any questions. Ensure to choose someone you can ask everything, and you are willing to share anything.
The best answers to the questions above depend on your needs and situations. However, you can use those questions as a guide in ensuring that you are hiring the best tax accountant.