If you’re looking for information on financial planning, you’ll find a lot of insights into how planners make their money and how they can circumvent significant expenses. However, you’ll struggle to find as much information about CPAs. So, how can you tell if your financial expert is working on your behalf?
You may already be seeking help from a provider of Certified Public Accounting. This does involve paying for another expert opinion, but it is usually a valuable investment. The advice can come in particularly handy for those with small companies, sole taxpayers with unusual conditions, and those who are charged higher income tax rates.
If you are in any of these categories, a CPA might be a better choice than a standard tax preparer. What makes CPAs stand out is their wealth of knowledge on what is known as ‘gray’ tax areas. In short, they know how to move in and out of the right tax tiers and sectors, without ever incurring any penalties.
For example, they can tell you which tax methods to pick or avoid because they study the behavior of the IRS for reference. On the other hand, it is important to remember that all financial experts should be judged by what they can give you. They are providing a service, and it must be everything that is promised.
If a CPA files your tax return quickly, without offering any suggestions or improvements, they may not be working for your best interests. Some CPAs have been known, for instance, to focus on certain types of clients and refer the rest out to another agency. You don’t want this, and you should keep an eye out for it. A good CPA will not take your business and then promptly decide that they don’t have time for it.
If you have any doubts about whether your CPA is earning the rate that you pay them, watch out for the following signs of trouble:
They Have No Qualifications
This is something that you should check before you hire a professional. You need to have a bachelor’s degree in a financial subject to become a Certified Public Accountant. After which, you need to pass a series of tough exams on corporate finance, industry regulations, auditing, reporting, and attestation.
Starting work as a qualified CPA is a lot like many other high-level jobs. All new graduates are required to work as an assistant to a full-time CPA for at least one year. This level of knowledge and expertise is part of the reason why they can be so expensive to work with. You’re accessing top tier financial advice. Your CPA should be worth of the fees that you provide.
Don’t be afraid to ask your CPA if you can see evidence of a valid license. If they are a reliable advisor, they won’t be offended. If they refuse, you have a reasonable reason to doubt their credentials. Alternatively, you can check the AICPA website to find out if your specific CPA has the correct qualifications. If you look in the right places, the website will also be able to tell you if they have ever been involved in disciplinary proceedings.
They Are Not Talking to You
When it comes time to file your taxes, you should know for certain whether you owe anything to the IRS and how big the sum is. It should not come as a surprise because the CPA has a duty to talk you through these things. If they have been doing their job properly, they’ll know in advance how much you owe.
Ultimately, a computer can handle the filling in and submission of tax returns. If you’re paying a professional, you have a right to demand more. The service being provided is sound, valuable advice, rather than just the processing of returns. CPAs offer advice on how best to monitor investments, recover from losses, avoid meeting phase out restrictions and stay up to date with tax regulations.
They’re Getting Paid Twice
Take the time to learn about how your CPA earns their cash and establishes their rates. Remember that they can charge a fee for investment advice OR a commission from the sale of an investment. They cannot demand both. It is known as ‘layering rates’ and it is not permitted. However, a chartered professional accounting firm can charge separate fees for tax and investment advice.
Finally, a CPA cannot directly charge for and regulate your investments if they are not FINRA affiliated. They must be registered with the Financial Industry Regulation Authority before they can offer this type of service.
How to Find a Reliable CPA
Finding a trustworthy CPA becomes a lot easier once you know what to look for. If you know anybody who has used one in the past, a good place to start is with their recommendations. Or, you can browse the American Institute of CPAs website. They have a list of qualified professionals and all of the relevant contact details.
Before you hire a CPA, it is worth asking yourself is you do need one. For individual contractors with simple setups, the answer might very well be no. If you own a company, though, you could be missing out some major tax deductions without the help of a CPA. The decision is yours to make, however, and some small business owners do choose to go it alone and avoid the extra expense.
The advice of a CPA is also recommended for those with complicated investment portfolios. They often provide clever ways to shrink obligations to Alternative Minimum Tax (which are legal and above board, of course). If you’re undecided, you might just want to speak to a CPA in person and have a chat about the suitability of the service for your tax affairs.
No matter what your chosen path, be an aware and informed customer. The vast majority of financial planners are hardworking, trustworthy people. There are bad ones out there, but a little bit of research and smart thinking is enough to avoid them.