Most of us like to spend as little time as possible with our CPA. Our once a year meeting is plenty and we try to keep it as short as possible. Who really likes to talk about how much money the government is going to take from us this year?
Proactive or Reactive?
Your choice of CPA can have a huge financial impact, and I’m not speaking of the fees that your CPA charges you for doing your taxes each year. Many CPAs operate reactively, simply accepting the documentation you send to them and preparing your taxes. But by the time you have put together your receipts, donations, W2s, and 1099s together for the year, you have likely missed out on many great ways to minimize your tax liability and preserve your wealth. You need to check your attitude toward working with your CPA, and both of you must take a proactive approach to your strategy.
The effectiveness of any CPA depends immensely on approach, timing and expertise when it comes to your taxes. It is vital for you to know what to look for when you are choosing a CPA. Failure to carefully choose will cause you to overpay your taxes, sometimes by a massive amount. The optimal CPA, using the correct resources, can potentially save you tens or hundreds of thousands of dollars or more.
Finding a CPA
When you look for a CPA, here is what you need to look for. The best CPA for you and your business will:
- Be in regular contact with you regarding your standings and developments.
- Consistently review your tax liability and manage it the best way possible within the tax code.
- Have trusted advisors that can handle niche tax benefits and beyond.
- Have a full knowledge of the IRS and be able to best represent you to them in case of an audit.
- Be proactive in his or her approach, looking at all areas of your business to determine the best way to avoid unnecessary tax burdens.
For example, let’s say that you did your own accounting for last year and end up paying $25,000 in federal and state income taxes. If you had a CPA who simply accepts your information at the end of the year and files your taxes, he might charge you $1,000 and bring your tax liability down to about $22,000. Good deal, right? Hold on … maybe not such a good deal.
The US Tax Code
The good news and the bad news are the same. Our tax system in the United States is immense. It is almost 75,000 pages and growing all the time. As a result, there are thousands of intricacies, exceptions, rules and loopholes. It is far more than the average person could ever fully understand, and they are constantly in motion.
My Best Example
My dad was a CPA, and he always told me that “in order to be a CPA in today’s world, you need to be ‘ten miles wide and a foot deep’. What he meant was, you need to know a little bit about a lot of things, and you need to know people who understand, and can help you with, the things you don’t fully understand. He had a group of trusted advisors that could help him, and his clients, do the things that he couldn’t do well, and he used them. My father was one of the best CPAs I have ever known. His style was was not only proactive; he was relentlessly proactive. He also always told me that “Tax evasion is a crime, but tax avoidance is mandatory.”
It’s Not About The Fee
Your CPAs level of dedication is the crucial element. A CPA cannot possibly understand and execute on the complexities of the tax code. Anyone can have a long list of clients, a beautiful office, and a great personality. The long and short of the matter is the amount of time and effort that your CPA is willing to invest in ensuring that your wealth is managed in the best possible way. The fees that are charged by CPAs vary widely. There are some cases where you get what you pay for, but that isn’t always true.
What Makes The Difference?
A great CPA will bring in those who specialize in things like cost segregation studies for their clients who own, or renovate, commercial or investment property, or to identify R&D tax credits, retraining or other innovative tax credits for which you may qualify. There are unique little-known tax strategies that cover all different markets, so to expect that your CPA will know how to use them for all industries is just not realistic. But if you have a CPA you know who is willing to utilize all the methods at his disposal, you can rest easy knowing that your wealth is in good hands.
With the help of a solid CPA you could, possibly, get that original $25,000 in taxes down to somewhere closer to $10,000 plus a few thousand or so to free yourself of the stress of managing your own taxes. THAT’Sa good deal!!
What you can do
If you don’t feel that your CPA is doing EVERYTHING possible to help you save on taxes, chances are very good that he or she is not. If someone is overseeing your finances, you should feel comfortable, informed, and confident in that relationship. Your taxes, your money, and your future is at stake.
I work with a large network of proactive CPAs across the United States. I am confident in the ways they deal with their clients and the taxes they pay. I’d be happy to introduce you to one or more of these great people to help you. Just give me a call or email me. I’m happy to help.
Leave a Reply