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17 Questions to Ask When Hiring a CPA

October 4, 2020.

17 Critical Questions to Ask When Hiring a CPA

It’s often difficult to differentiate between a good CPA and bad one, especially at the outset of the relationship.  Doing some homework up front can help you pick the right one and provide you with benefits for years to come.

Question #1: Is timely service delivered?

A proficient CPA makes it a habit to get back to clients as quickly as possible. Phone messages should be replied to the day they are left – or no later than the following day.

Question #2: Do the same people always service your account?

Ideally the same person should work with you — not whoever is available at the time. That way a relationship can be built where the accountant and you are comfortable with each other.

Question #3: How can the accountant help you make more money?
It sounds like a wise-guy question, but the answer will help you find out if candidates are interested in your business. Did they review the financial information you provided prior to the interview? Did they make sure you understood the accounting concepts, instead of tossing off a bunch of jargon?

A proficient CPA’s goal to save you more in taxes — it is also in his best interest that you succeed.

Question #4: Do you believe I’m paying too much, too little, or just the right amount of tax?

Beyond simply preparing tax forms, an accountant should be involved in tax planning throughout the year. Typically, a quarterly review should be scheduled, which allows the CPA time to proactively advise clients in a holistic and comprehensive manner.

Question #5: Will Your Tax Accountant Offer Proactive Advice?

You want a tax accountant that asks A LOT of questions and is detail oriented. If they see something in your books that might not be correct, you want to make sure that they are going to point it out to you and recommend avenues to either fix the problem or at least ensure that it doesn’t continue. They should be able to educate you on whether you are paying too much, too little, or the right amount of tax, and why.

Ask them point blank what steps they expect to take to provide proactive tax planning services to you.

Question #6: Who are your other clients?

If they clients that appear similar to you, that’s a good sign. In asking about clients, you will also want to understand the CPA’s work schedule and whether he has the time and resources to support you adequately.

Question #7: What kind of credentials do you have?

Tax professionals are usually certified public accountants (CPAs), enrolled agents (EAs) or unenrolled preparers.

Question #8: How long have you been a Certified Public Accountant, and what other licenses do you hold?

You should inquire with the state CPA organization to discover if there have been any disciplinary actions entered. Some accountants also have credentials as financial planners (PFS), securities representatives, business valuation experts, even lawyers. Check web directories and websites (e.g., https://www.CPAdirectory.com)

Question #9: How much professional education do you get annually?

Just passing the test to be a CPA or an EA isn’t enough. With the tax code and interpretations of the code changing every year, continuing education is really essential.

Question #10: What’s your policy on returning phone calls?

A common complaint often heard from consumers about their CPAs is about long wait for returned phone calls. CPAs aren’t famous for their communication skills. It’s not unreasonable to ask how long you should expect to wait to have a call returned. Asking also lets your CPA know you do want your calls returned promptly.

Question #11: How are your fees calculated? Will you be charging me for every phone discussion?

To avoid friction later, it is essential to discuss the CPA’s fee structure. Tax professionals may bill by the hour, form, overall return or some combination. After reviewing your previous returns and interviewing you, a tax professional should be able to give you a good faith estimate of costs. If the CPA uses a time-based system, discuss the hourly rate of the accountant and staff, overhead expense reimbursement (what is the cost of a fax?) and whether certain time is not billed.

Find out now whether a simple two-minute phone call or a one-page fax means an hour of billable time. If that’s the case, run for the door.

Question #12: What can I do to help you with your work and keep your fees to a minimum?

A great deal of your accountant’s time can be saved by preparing information beforehand. Find out if your CPA is willing to work with you so that you can save on fees.

Question #13: Do you perceive any potential conflicts of interest?

It’s always good to ask this question.  CPA’s should proactively communicate any potential conflicts of interest before they arise and they should be able to outline their procedures for doing so.  CPAs work for dozens of firms and scores and sometimes hundreds of individuals, and a conflict of interest could easily arise that you’re not aware of.

Question #14: Do you know the requirements of the states and localities where I am required to file? Yes, federal income taxes know no boundaries – those rules don’t change from one state to the next. But that’s not true when it comes to states and localities. Your state or locality may have quirky filing requirements, especially for business owners. It can get even more complicated if you’ve moved from state to state during the year or if you live in one state and work in another. You may also need special guidance if you own a business or real estate in a state outside of your residency or if you are the beneficiary of a trust or estate in another state. Make sure that your preparer knows – and can handle – all of those filing requirements.

Question #15: What records and other documentation will you need from me? While you shouldn’t be expected to haul in the contents of your entire home office, a reputable preparer should insist that you provide your forms W-2, 1099, 1098 and other verification of income and expenses in order to prepare a proper return. You shouldn’t use a preparer willing to e-file your return just by using a pay stub (that’s against IRS rules). A tax preparer should be able to explain what will be needed for special schedules, forms or circumstances. If a preparer isn’t inclined to do the necessary due diligence (especially for something like the Earned Income Tax Credit) in the beginning, it should give you pause about what other corners the preparer might be willing to cut later – at your expense.

Question #16: What happens if I get audited? Nobody wants to think about an audit when filing a return. But you need to ask: find out how the tax preparer handles audits or examinations from IRS. Will he or she respond to those questions? Can the tax preparer represent you in front of IRS or Tax Court? Remember that attorneys, CPAs, and Enrolled Agents are the only tax professionals with unlimited representation rights, meaning they can represent their clients on any matters including audits, payment/collection issues, and appeals in front of the IRS. AFSP participants have limited representation rights, meaning they can represent clients whose returns they prepared and signed, but only before revenue agents, customer service representatives, and similar IRS employees, including the Taxpayer Advocate Service. For 2016, PTIN holders without an Annual Filing Season Program – Record of Completion or other professional credential are only be permitted to prepare tax returns. That doesn’t have to be a deal breaker (there are professionals who focus on audits if you need to hire someone later) but you should understand the scope of services and representation before you agree to become a client.

Question #17: What Tax Issues Does Your Accountant Specialize In?  Does your accountant even specialize in tax?  If you are going to have a professional tax accountant file your tax return, find one that actually LIKES doing tax. They learned this stuff so that you don’t have to! The unapologetic tax nerd is your ally.

 

Have Questions?  Contact Us!

 

References

Koeller Thomspon.  23 Critical Questions to Ask When Hiring a CPA.  23 Critical Questions to Ask When Hiring a CPA (ktcpas.com).  March 5, 2016.

Phillips, Kelly.  “12 Questions to Ask When Choosing a Tax Preparer”.  12 Questions To Ask When Choosing A Tax Preparer (forbes.com).  January 18, 2016.

Edstrom, Ingrid.  “Top 11 Most Important Questions For Finding the Right Tax Accountant”.   Top 11 Most Important Questions for Finding the Right Tax Accountant – Priestess of Profits | Business Transformation Consulting.  October 4, 2020.

The information in this article is general in nature and for informational purposes only.  None of this information is intended to be personalized (and tailored to an individual’s unique circumstances) and should never be construed as specific tax, legal or financial recommendations.  Before making any financial decisions, you are strongly encouraged to first consult with a qualified financial professional.

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