As a small business owner, you may find it difficult to gauge when to outsource responsibilities or handle them on your own. This is especially true in the case of a certified public accountant (CPA), especially if you’ve just started your business or if your company has grown beyond an expected size.
While you can certainly take care of the day-to-day accounting yourself – especially if you have good accounting software – or hire a bookkeeper, there are instances when the expertise of a CPA can help you make sound business decisions, avoid costly mistakes and save you time.
CPAs are tax experts who can file your business’s taxes, answer important financial questions and potentially save your business money. While CPAs have accounting degrees, their certification differs from traditional accountants.
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CPAs have passed the Uniform CPA Exam – a rigorous exam that tests one’s understanding of tax law and standard accounting practices – and obtained a state license, which includes ethical requirements. They must take professional education courses to maintain their license, and may lose it if they are convicted of fraud, negligence or ethics violations. Furthermore, CPAs have unlimited representation rights to negotiate with the IRS on your behalf.
A CPA is a specialized type of accountant with tax expertise who can represent you before the IRS.
An accountant is someone who has earned their bachelor’s degree in accounting or finance. A CPA has a bachelor’s degree, but has earned additional designations upon graduation.
To become certified, an accountant must have work experience, pass the Uniform CPA Exam, and meet all state licensing requirements. The exam covers their knowledge of business, accounting, tax and auditing. Additionally, CPAs are required to take continuing education courses throughout their careers to stay up to date on laws and regulations.
Because of this certification, a CPA has a fiduciary responsibility to their clients, while an accountant does not. This means CPAs are legally required to act in the best interest of their clients, whereas a standard accountant does not have a license to lose.
CPAs can wear many hats for your small business. They handle bookkeeping, preparing important financial documentation (e.g., tax documents and profit-and-loss statements), financial planning and tax filing, among other tasks.
They can also provide sound financial advice for your business as you continue to grow, so you can concentrate on running your business. These are the general responsibilities you can expect from a CPA:
In addition to bookkeeping and payroll, a CPA assists with tax advice, planning and compliance. They can also consult with you on your budget and other complex financial matters.
The short answer is that it depends largely on your business and the services you need. According to the U.S. Bureau of Labor Statistics, the median hourly wage for CPAs is $40. This may not, however, cover specific fees for certain services and consultations.
It’s important to have an idea of the kind of services you need before you meet with a prospective CPA. This way, you can have a clear discussion on how they are going to bill you.
By itemizing costs, you can gain a realistic idea of how the CPA could help your organization thrive. You’ll also be able to weigh the cost and benefits of outsourcing certain services that you may be able to complete through a software program or other means.
While it’s hard to pin down a concrete number for how much you can expect to pay a CPA, it is important to have a knowledge of typical fees and expenses. These are some typical expenses to review before you meet with a CPA:
The national median wage for a CPA is $40 per hour. Before hiring a CPA, ask about their hourly rate and other potential fees that apply.
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You don’t necessarily need to hire a CPA as a full-time or even part-time employee to benefit from their knowledge of the ins and outs of business finance, as many offer their services as consultants. These are times you should consider hiring a CPA:
When you’re launching a business and money is tight, the idea of paying hundreds of dollars for a few hours with a CPA may seem extravagant. However, like many other startup costs, it’s an investment (and it’s a deductible expense).
A CPA can help you set up your business so you can avoid costly mistakes. These are some of the decisions a CPA can assist you with as you get your business up and running:
CPAs can prepare tax documents, file tax returns, and strategize ways to minimize your tax liability for the following year. Also, CPAs can represent you if the IRS has questions about your return or if you or your business are audited, which is an important consideration.
Business taxes are different from personal taxes; even if you’ve always done your taxes yourself, you may want to hire a CPA if your tax situation is complex. For instance, if you hire employees, or if you sell products to customers in multiple states or countries, hiring a CPA to file your taxes can save you time and heartache.
These are other ways CPAs can assist you with your taxes:
These are some instances when you might need a CPA’s advice:
As you run your business, there may be specific instances when you need a CPA’s expertise. For example, if you receive a letter from the IRS notifying you that you’re being audited, or even if it simply requests additional information about your return, you should hire a CPA to represent you. CPAs have experience dealing with the IRS and can help you respond appropriately, supply the information it needs, and resolve the issue as painlessly as possible.
These are some other situations that may prompt you to hire a CPA:
When you’re facing significant structural or operational changes to your organization – such as purchasing a business, merging with another company, planning to sell or close your business, or deciding whether to take on a new partner or dissolve a partnership – you should consult a CPA about the tax implications for your business and for yourself.
If you’re purchasing a business, a CPA can help you analyze its financial records, verify its assets, and perform your due diligence. If you’re selling your business, a CPA can give you an idea of the fair market value of your business, and prepare your financial reports and statements.
When you have a serious buyer, they expect you to have perfect accounting records, with an accurate valuation – and you may lose potential buyers or receive a lower offer if you don’t meet these expectations.
You should plan to meet with a CPA before you start your business, at tax time, when you have complex financial decisions to make, or when you plan to make major changes to the ownership of the business.
Hiring a qualified CPA can be a lifesaver come tax season, but as you can see, a CPA can help you at every stage of your business. If you’re searching for the right person, here are a few things to keep in mind.
It’s important to find a CPA who’s familiar with your industry and the needs of businesses like yours. For instance, if you run an e-commerce business, then your accountant should have experience with serving online companies.
If you’re friendly with other business owners in your area, ask them for recommendations. The best place to start is a local networking group. If you don’t have anyone to ask for a referral, you can search the American Institute of CPAs.
Before you hire anyone, use the CPA Verify tool to check that individual’s certification status to ensure they are up to date with their requirements.
Lastly, when considering a CPA, check their online reviews or their Better Business Bureau accreditation. By doing your due diligence, you will have the best chance of hiring a highly qualified CPA.
Lori Fairbanks and Matt D’Angelo contributed to the writing and research in this article.