Few dates evoke more trepidation among small business owners than tax day. But even after they have filed their tax return, they may not breathe a sigh of relief if they have concerns about getting audited.
The April tax deadline is not the only important fiscal date for small businesses. Many people who own businesses must also make estimated tax payments. Hiring an accountant to assist not only with tax preparation but also with planning, bookkeeping, payroll, and other services can free business owners up to focus on executive functions. If you find yourself dreading all things tax- and accounting-related, it may be time to bring in help.
What Does an Accountant Do?
Accountants, according to the American Institute of Certified Public Accountants, speak the “language of business.”[1]
Good accountants have specialized tax knowledge and are able to identify tax-saving strategies. But an accountant’s skillset can extend to many other business tasks, including the following:
- Tracking sales and expenses
- Keeping an eye on cash flow
- Billing clients
- Paying invoices
- Running payroll
- Producing financial statements
- Budgeting
- Assessing financial data
- Conducting internal audits and audit defense
Not all accountants provide all of the foregoing services. And even if an accountant can do all of the above, a small business may not need all of these services. The business may already have a bookkeeper who handles day-to-day financial transactions, but it may be beneficial to have an accountant analyze the data to provide information that can help the owner make business decisions.
CPAs versus Accountants
All certified public accountants (CPAs) are accountants, but not all accountants are CPAs.
Accountants typically hold a bachelor’s degree in accounting, finance, or a related field. CPAs also have an undergraduate degree but must meet more rigorous criteria to earn their professional title.
Becoming a CPA entails meeting education and experience requirements and passing the Uniform CPA Exam. Eligibility to sit for the exam is based on state requirements. Many states require a CPA candidate to have one to two years of experience working for a CPA. Some states also require an ethics exam. In addition, CPAs must comply with rules of professional conduct and undergo continuing professional education (CPE).
CPAs are trained in standardized accounting principles and best practices. As government-recognized specialists in their field, they are uniquely qualified to perform certain tasks—such as preparing audited or reviewed financial statements, representing taxpayers before the Internal Revenue Service (IRS), and filing reports with the Securities and Exchange Commission—that non-CPAs cannot do.
Businesses that need help with these specific services should hire a CPA instead of an accountant. But for basic tax filings and other standard accounting services, an accountant may suffice.
CPA and Accountant Costs
CPAs generally charge more for their services than non-CPAs because of their more robust credentials. The fees for both groups vary depending on the professional’s experience level, geographic area, and the tasks they perform. The Bureau of Labor Statistics (BLS) puts an accountant’s average wage at around $35 to $40 per hour.[2] Hiring a CPA can cost around $100 per hour for full payroll services and $175 per hour or more for tax services.
Hiring a CPA for an Audit
Businesses may choose to hire a non-CPA for most accounting functions. But only a CPA, an enrolled agent, or an attorney can represent a business before the IRS if it is audited.
About 1 to 2.5 percent of small businesses face an audit each year. The odds of getting audited are low, but some experts say that small businesses are more likely to be targeted because they tend to receive more income in cash, making it harder to identify and easier to misreport.[3]
With the IRS set to receive a substantial budget increase over the next decade, there is speculation that the number of small business tax audits, especially among high earners and cash businesses, could increase in the coming years.[4]
How to Find an Accountant
Whether a small business needs à la carte accounting services, is looking to hire an accountant full-time, or requires regular communication with an accountant, finding the right professional is crucial. To put together a short list of candidates, look to the following sources:
- Professional network referrals. Coworkers, business associates, attorneys, financial advisors, bankers, fellow business owners, and other members of a professional network are a good starting point for finding an accountant. Accountants and CPAs may have broad business knowledge and an array of skills, but it makes sense to choose a professional with a track record of working with small businesses and, even better, in the same industry as your business.
- State and national associations. State accounting boards, including the National Association of State Boards of Accountancy,[5] and CPA societies such as those listed by AICPA[6] offer local member directories.
- IRS directory. The IRS maintains a database of federal tax return preparers sortable by skills, education, and areas of expertise, as well as by city, state, and zip code.[7] Basic tax preparation requires only a Preparer Tax Identification Number (PTIN), but IRS audits, payment and collection issues, and appeals must be handled by CPAs and other professionals with government-recognized representation rights.
- Recruiters and job boards. Businesses in search of a full-time, in-house accountant can use a recruiter or job listing site to connect with candidates. LinkedIn is a valuable source for finding accounting talent and also offers a guide for hiring accounting professionals.[8]
After you have put together a short list of accountants, you can compare prices, qualifications, and personalities to find the right fit. As with other business decisions, focusing solely on price can be misguided. An experienced accountant might charge more than a recent college graduate, but their knowledge is likely to save you money by helping you take advantage of tax deductions, tax breaks, and good financial strategies.
It goes without saying that the person you hire should be knowledgeable and capable, but do not underestimate the importance of an interpersonal connection. Your accountant or CPA should be someone you are comfortable reaching out to at any time and entrusting with company information to which few people are privy.
Ideally, you will build a long-term relationship with your accountant that enables them to gain a deep understanding of your business. As a member of your team of advisors, they will be able to spot trends and offer personalized advice. And if an audit or another trouble spot emerges, it is important to be able to count on a professional who will provide you with sound advice.
Let Us Connect You with a Tax Professional
Our small business attorneys assist small businesses with legal and tax planning advice and dispute resolution services. We can also refer you to reputable local accountants and CPAs with whom we have previously worked. Call or contact us if you would like to set up a consultation.
[1] Frequently Asked Questions FAQs – Become a CPA, AICPA, https://us.aicpa.org/becomeacpa/gettingstarted/frequentlyaskedquestions (last visited Aug. 7, 2023).
[2] Occupational Outlook Handbook: Accountants and Auditors, U.S. Bureau of Lab. Stats. (Sept. 8, 2022), https://www.bls.gov/ooh/business-and-financial/accountants-and-auditors.htm.
[3] David William, Is the IRS Targeting Small Businesses? Yep, Says One Expert, Small Bus. Trends (Jan. 27, 2023), https://smallbiztrends.com/2016/09/irs-targeting-small-businesses.html.
[4] Fatima Hussein & Kevin Freking, Debt Limit Bill Gives Republicans IRS Cuts, but Democrats Say They Expect Little Near-Term Impact, AP (June 1, 2023), https://apnews.com/article/irs-debt-ceiling-budget-x-date-yellen-fe538fd8371cdf647400a27e6d56a9fb.
[5] Boards of Accountancy, Nat’l Ass’n of State Bds. of Acct., https://nasba.org/stateboards/ (last visited Aug. 7, 2023).
[6] Associations–State CPA Links, AICPA, https://us.aicpa.org/research/externallinks/associationsstatecpalinks (last visited Aug. 7, 2023).
[7] Directory of Federal Tax Return Preparers with Credentials and Select Qualifications, IRS, https://irs.treasury.gov/rpo/rpo.jsf (last visited Aug. 7, 2023).
[8] Hiring Accounting Professionals, LinkedIn, https://business.linkedin.com/talent-solutions/resources/how-to-hire-guides/accounting-professional (last visited Aug. 7, 2023).
