For most people, choosing an accountant is challenging, as it means giving your complete trust and confidence to a virtual stranger. But finding the right accountant is a necessary decision if you use a long form for your taxes or if you own a business of any size.
Things to consider when you are choosing an accountant include location, reputation, cost, expertise in relevant areas, what kind of relationship you will be able to build, convenience, certification or license, services available, staff, availability, who will actually work on your tax forms, and what support is offered in case of an IRS audit.
With phones, scanners and email, it may not be necessary to choose an accountant in your vicinity. If you've already established a working relationship and then you (or your accountant) move away, you might feel comfortable continuing to do business together over the wires; however, if you are looking to begin a new relationship with an accountant, you need to decide whether you would be at ease carrying on a long-distance association and make sure the accountant is amenable to the idea.
Business owners, entrepreneurs and freelancers often need to file quarterly taxes, and yearly audits may be required, depending on the nature of the business. Whether a bookkeeper is part of your staff or not, your accountant will need to review your books periodically to ensure accuracy and to prepare quarterly returns. Audits, whether necessary because of the nature of your business or because the IRS has decided to review your numbers, require fully documented figures and complete records. Ask prospective accountants whether they would be available and willing to attend any IRS audits and/or provide any required paperwork. If so, how much extra would you have to pay for their time?
Speak to others in similar income and employment situations and ask for recommendations about area accountants. Before deciding, ask accountants about their experience, their training and any certification or licenses they have. An accountant may be a certified public accountant or have a master's degree in tax preparation in any of the following areas: individual, partnership, corporate and fiduciary tax. Tax attorneys have advanced degrees, such as a Master of Laws. In addition, there are continuing professional education requirements and updates in yearly tax law changes.
If your needs are not complicated, one of the local tax preparation businesses in your area should meet your expectations. Because there are usually multiple tax preparers available at such a place, appointments might be easier to come by. Preparers at the large tax preparation firms generally don't need prior experience. They typically just have to take 60 hours of class, get bonded and acquire a tax preparer number. These people are adequately trained to do basic taxes, even long forms, but might not have the expertise specific to your industry. In addition, you might not have the chance to build a long-term relationship. There are also do-it-yourself online tax preparation programs.
It's generally recommended that individuals find a tax accountant with at least five years' experience in tax preparation. If you have a business, you should look for an accountant who is experienced and familiar with companies that are the size of yours and with the field you're in. For example, building contractors have specific and necessary expenses that might not occur to someone who is not familiar with that industry. Someone who is paid with royalties does not necessarily report income the same way a business would report income, and the accountant needs to be familiar with the forms and criteria used.
Your fee can vary depending on the tax forms -- e.g., W-2 and 1099 -- that are needed and how many are being filed. It's been said that a good tax accountant will pay his own way in the money you save in taxes. You can help keep the fees a little lower if you keep accurate records and hand the accountant organized information; yes, there are some people who simply bring a shoebox full of receipts. The cost of having your taxes done ranges from zero to a few hundred dollars, and there may be additional fees if partnership or business forms must be filed.