Finding a proactive accountant — one who goes beyond simply preparing your tax returns — can help chart your financial course and put you in control of your money. Whatever your level of knowledge, accountants can help you better understand your financial situation.
“Even in this day and age,” says Debra Simon, a certified public accountant in New York and New Jersey, “there are still a lot of women who don’t know the financial structure of their own world.” As a business owner, you can’t afford not to know.
Accountants primarily assist with tax compliance and tax planning. While tax compliance is relatively simple and involves filling out the correct forms and sending them in on time, tax planning is a more complex process concerned with structuring your finances to minimize your taxes.
Proactive tax planning encompasses everything from deciding whether to buy or lease a car to figuring out whether tax-free investments such as 401(k) accounts make sense for you. In addition to advising on strategies to help you avoid paying excessive taxes, a good accountant can help you understand the long-term tax ramifications of life changes such as leaving a job, buying a home, getting a divorce or planning for retirement. And you’ll also want an accountant at your side if you are audited.
When and How Often?
At minimum, consult your accountant in October or November to ensure that you are taking advantage of any tax breaks before the end of the year. When helping you time discretionary income and payments to fall strategically before or after December 31, your accountant will take federal, state and local tax laws into consideration
Ideally, confer with your accountant early in the year following your fall meeting. This will give you time to develop and implement your strategies for the new tax season. If you have complex finances, you should meet regularly — either quarterly, bimonthly or monthly — to chart your changing course.
The Essential Fit
Bigger is not necessarily better when it comes to choosing accounting firms. Still, the same principles used by big corporations can apply to individuals looking for an accountant.
“The two main things to look for when choosing an accountant,” says Pamela Packard, a partner at the international accounting firm BDO Seidman, “are expertise and relationship.”
Many financial professionals can assist you with taxes, including simple tax preparers, certified financial planners, financial analysts, attorneys and even insurance agents. But a certified public accountant (CPA) is the only one specifically trained and licensed to do so. CPAs must comply with continuing education requirements and renew their licenses every few years, so the advice they give should always be current.
Make sure that the person or firm you hire is well versed in doling out the type of advice you need. A credible accountant who primarily deals with individuals with multinational business transactions in Japan and Australia, for example, may not be the best choice for a woman who is starting a business, buying a house and making personal investments in Ohio.
Entrepreneurs may be tempted to hire separate accountants for personal and business affairs. However, it is almost always better to have one accountant who knows about both personal and business tax regulations. The accountant can then see the two sides of your finances, and structure them to minimize your combined tax liabilities. Otherwise, for example, you might wind up paying a little less in business taxes at the expense of much higher personal taxes.
Above all, the person or firm you choose to handle your accounting must have your complete trust. Going with your instincts and paying attention to how you feel about the person or firm you are looking to hire is crucial.
“The only way an accountant can really help you, whether it is in achieving business or personal financial goals,” says Ellen Gabriel, a partner at Deloitte & Touche, “is to get to know you and what the issues of your business are — to find out what keeps you awake at night. Whether it is General Motors or one-on-one tax planning, these relationships are all about the ability to have a close, ongoing, year-round sharing of information.”
Even if a particular accountant or firm has marvelous credentials, keep searching until you find someone with whom you feel you can form a lasting relationship.
Where to Find an Accountant
Word of mouth is often the best way to find a good accountant. If you know someone whose financial affairs are similar to yours, start there. Professional organizations may offer a list of accountants who are well versed in helping people with similar finances.