I’ve been writing about money on the internet for almost 15 years. During that time, I’ve built up a successful freelance writing and consulting business. Today, I have multiple business ventures with partners and income streams beyond my freelance writing. As a result, tax time can sometimes get messy.
Although I originally completed my own taxes, I eventually realized that the whole process was cumbersome and taking up way too much time. So, I decided to hire an accountant. Here’s my story and how to tell whether you need an accountant.
How I knew I needed an accountant
My biggest aha moment came when I realized how much time it was taking me to do my taxes. I’d spend days getting all my documentation together, cross-referencing different schedules and making sure that everything was in proper order. Using tax preparation software didn’t make things much easier.
After speaking with an accountant while getting an income audit to qualify for a home purchase, I realized that an accountant could save me time — and probably money. With the help of the accountant, I was able to restructure my business, and essentially just bring everything to him at tax time. Not only did I spend much less time in tax prep, but I also ended up saving money.
6 signs you might need an accountant
1. Your taxes are increasingly complicated
When you’re just filing a couple of schedules, you might not feel like you need an accountant. One of the advantages of a sole proprietorship is that you just need to fill out a Schedule C (Form 1040). However, that simplicity might not stick as your finances change.
Even if you stick with a sole proprietorship, you might start seeing investments, or maybe you’re buying investment properties and renting them out. Perhaps you have income from overseas, or you’ve lived in multiple states during the last tax year. The more schedules and forms you add to your tax return, the more difficult things become. An accountant can help you sort through everything and make sure it’s done right.
2. You have different businesses
As my own business grew and changed, I started entering into different arrangements with other business owners. On top of that, I began segmenting some of my own business activities, creating different entities for various activities. Keeping it straight was a little difficult. Hiring an accountant to help manage all of the different expenses made a lot of sense, especially because business filing deadlines are different from personal filing deadlines.
Not only could my accountant help me manage the cash flow from different businesses and joint ventures, but he was also able to more efficiently file my taxes for each entity as appropriate. If you have multiple tax returns, an accountant can help you too.
3. You have significant business expenses
Although listing things on a Schedule C as a sole proprietor can make sense for a while, once your business takes off and you have significant expenses, it can be difficult to sort them all out.
Your accountant can help you move beyond that requirement. With an accountant to help you manage cash flow, you can keep your business expenses separate from your personal costs. It’s possible to connect your business credit card spending to accounting software that you can then share with your accountant to help you keep track of everything — and use it easily when tax time comes around.
4. It’s taking too much time to do your taxes
Before hiring an accountant, doing my taxes had grown into a process that took an entire weekend. Now, it takes me about three hours to round everything up, send it off to my accountant, and have him do the heavy lifting.
If you find that you’re spending hours (or even days!) working on your taxes, it might be time to outsource the task. Rather than wasting time on preparing your taxes, you can instead hire an accountant to take care of it. Then, you can focus on growing your business and potentially make even more money. I know that my time is better used by writing an article or booking a consult with a client than it is doing taxes.
5. You need help evaluating your current business structure
My accountant has spent the past three years telling me to change my business tax election from a limited liability company (LLC) to S Corporation (S-Corp). I’ve finally decided to change things up. A good accountant can help you evaluate your business and find a tax treatment that works best for you. I wish I’d listened to my accountant sooner and made the switch. It’s already a better situation for me with the new election.
6. Payroll is taking up too much time
Finally, an accountant can help manage payroll. If you have employees, or even if you’re just paying yourself a salary, your accountant can help you set up systems to manage your payroll and ensure that everyone is paid on time and appropriate tax payments are made.
My accountant recommended Gusto, since my situation is fairly simple when it comes to paying myself a salary. However, he’s an administrator on the Gusto account, so he can go in and see my account — and use the information to file my taxes.
In fact, with the new arrangement based on my election and using this payroll tool, my accountant will basically be able to simply pop into the account, check things out, and prepare my taxes with even less input from me. It’s a huge time saver.
How to choose the right accountant
- Choose someone that understands your needs. My accountant specializes in freelancers and others who work online. Consider finding an accountant that understands the ins and outs of your niche.
- Check for certifications. Find out what certifications your accountant has. For example, CPAs have to be registered and you can find them in a public database. If you want an enrolled agent to help with your taxes, follow up. Also, find out whether they have passed required state licensing exams. You don’t need all these things, but if there’s something specific you’re looking for, check to make sure your accountant has the credentials.
- Ask for recommendations. Find out whom other business owners and those in your network use. This can be a good place to start.
- Learn about the process. Every accountant has their own process. My accountant is on the other side of the country, and his process includes using secure file transfer and cloud technology to share documents. Find out what process is used, and what types of documentation are needed to move forward. Look for an accountant whose process works for you.
- Review the fees. Compare different fees from different accountants and firms. Depending on what you need, costs can vary widely. Be specific about what you need and explain it the same way to all your potential clients so you can compare apples to apples.
- Interview. Whether you sit down with an accountant in person or do a phone interview, you need to go through this process. If something feels off, or if you don’t feel comfortable, move on. Interview three or four prospects to get an idea of whom you might work well with and whom you think you can trust.
At some point, you’ll probably need an accountant to help you manage your business cash flow and/or taxes. As you become more successful — and as things become more complicated — an accountant can save you time and help you use strategies to improve your tax situation.
Take the time to look for a good accountant and establish a good working relationship. Although it might mean an investment of time, energy, and money upfront, the return is likely worth it in the end.