“OH MY GOD, I cannot reply FAST ENOUGH — get an accountant!!!! The money you shell out to them is worth all the time and energy and stress and frustration that you save…just THINK, in cost-benefit analysis, how much more time it allows you to play with your children, or get exercise, or read a book (maybe?), or…whatever!!! It enables you NOT to be cranky!” –Elizabeth Shammash
This note was just one example of the outpouring of support, encouragement, advice, and recommendations that readers sent me in response to my post a few weeks ago about whether and how I should hire an accountant to handle my self-employment income taxes.
Thank you. Your knowledge is impressive, and I was touched by your generosity with your time and expertise. Now it’s my turn to share what I learned with others who might be looking for an accountant.
(If you have a more straight-forward tax situation, like I did last year, you might like these posts:
Why the Self-Employed Should Fork Over Accounting Fees
The first hurdle for me was figuring out whether I really did need an accountant to handle my husband’s and my new small business income. Being a DIY-enthusiast, I wondered whether I should just buck up and deal with it myself. Readers put me to ease, and everyone whole-heartedly agreed that hiring an accountant for small business taxes is essential:
You were writing the other day about learning to delegate certain tasks — I highly recommend you make this one of them. The time, energy, and positive emotions that you will spend trying to do your own taxes when they become this complicated are not worth it. You’ve got your self-employment income, your husband’s, his other job — it really does get complex, and you can find yourself paying a lot more than you’d like to. –Michelle
Listen to your uncle about hiring a CPA to do your taxes. You are a busy lady with Frugal Mama and your young family and time is precious to you. Initially, you may think you can do taxes yourself or a regular, plain vanilla accountant can do your taxes but depending on your circumstances hiring a CPA specializing in tax work could save money in the long run. Know your strong suit and then hire experts for the rest. –Elizabeth Carmody
You definitely want to get some help with your business accounting and your taxes. It is not worth the worry, time, effort and possibility of costly mistakes to try to do it yourself. I am sure there are great books and software programs out there, but nothing beats a 30 minute consultation with an accountant that deals with small business matters every day. –Amy Ballantine
I have ALWAYS paid an accountant, ESPECIALLY as a self-employed crazy freelance opera singer working in 15 states. AND they are specialists in knowing what you can deduct and all that so that you probably save a bit more in the end. –Elizabeth Shammash
I agree with your other readers, this is one place to “splurge,” you will save yourself boatloads of anxiety and late nights. Your accountant will likely find ways for you to keep some of the income that you won’t realize you can keep/claim/deduct, etc on your own. —Autumn Penaloza
How to Find a Reputable Accountant
OK, so I am convinced that a professional is going to make my life simpler, as well as possibly save me money in the end. But how do I choose an accountant? Just look up someone close by in Google Places? Post on the neighborhood listserv? Ask friends? I did all of those things, but I still wasn’t coming up with the right person.
“I am not a CPA but am married to one,” reader Elizabeth Carmody wrote me. “I would urge you to call and talk to my husband and I am sure his advice will be invaluable — not because he is my husband, but because he knows his stuff and how to communicate it effectively to his clients.”
I took up Elizabeth on her kind offer to call her CPA husband, Timothy Carmody, based in Dallas, Texas. Tim spent a good 30 minutes on the phone with me discussing how to find an accountant, what to look for, and how to save money on fees. You will find his advice sprinkled throughout this post, as well as his contact information (under Personal Recommendations), in case you are looking for an accountant that can work long-distance.
Tim recommended that I ask my husband to talk to other doctors he practices with. If an accountant can handle physicians’ income, he or she could definitely handle my small business income. Here is some more advice from readers:
You may want to check with your local Small Business Development Center (SBDC). SBDC can give you a referral to a CPA that may work primarily on small business, as some of the big firms can be very expensive. In Syracuse I pay our CPA about $450 per year — which includes our personal (and business) tax return, and estimated quarterly payments. –Joan Hebert, MBA, MS, Hebert Performance Training
Call a few, see what services they offer and what they’ll charge, shop around, and get recommendations from other business owners. –Bonnie Timmerman via the Frugal Mama Facebook page
You want to be sure that the person you hire to do your taxes is certified with the IRS & has had ongoing updated classes with new tax laws & tax updates.
Full disclosure: I work for H & R Block. We truly have the best tax professionals qualified to take care of you & your small business. We are required by HRB to take at least 24 hours/year of federal & state classes before being hired back. You can go to www.hrblock.com and find a tax professional there. We all have biographies online with our tax experience & also personal interests. You want an enrolled agent &/or someone that specializes in small business taxes. You also want to be able to sit down with the person that is doing your taxes & ask questions while they are being done. This is a process that you want to understand. If the IRS questions anything, they will hold you accountable because you signed the return. I would be happy to answer any questions you may have. I have been working for HRB for over 10 years now. I love my job!! I love doing taxes, both personal & small business. –Gina Barnowsky
You might also contact your state or local CPA society. They may be able to provide a listing of tax CPA in your area. –Liz Carmody
So what did I do?
I started with the one CPA recommendation I was given: by my lawyer. As I feared, my lawyer’s accountant was a little bit (OK, a lot) pricey. At $340 per hour, he was exactly the kind of high-powered CPA that my readers were telling me I didn’t need. But of course he was knowledgeable and would provide business consulting as part of the package. I started convincing myself that maybe a top accountant was an investment I should be making in Frugal Mama, and that his advice would not only save me on taxes but help me grow my business.
I noticed that my lawyer’s accountant was listed in Washingtonian magazine’s round-up of the city’s best tax accountants, so I called another guy on the list to see if he was any more affordable. At $290 per hour, he wasn’t giving me any breaks. The two accountants, plus Tim, were estimating that our small business accounting fees would run between $500 and $1000, and — if I went with one of these high-profile Washington CPAs — it would definitely be toward the higher end of that range.
Thankfully my husband and my mom brought me down to earth, and I kept on trucking in my search for an affordable accountant.
How to Save Money on Accounting Services
Tim Carmody explained to me that there are varying levels of accounting professionals, and the ones with more experience and education, of course, charge more. A bookkeeper is not licensed but has some knowledge of tax software and accounting; an accountant is anyone with an accounting degree; and a certified public accountant (CPA) has achieved a certain level of experience and has passed an examination that sets national standards for the profession.
He also mentioned I might be able to save money by hiring an enrolled agent, instead of a CPA. An enrolled agent is a tax adviser registered with the federal government, and here in D.C., they are often also retired IRS employees. Here is some more advice from readers:
I am an accountant and almost a cpa. If you can do good bookkeeping yourself, then hiring a tax accountant is much cheaper. The less I have to do to manipulate the wrong numbers (to make them right)… the cheaper it is. So my advice… Learn bookkeeping well. Hire an accountant that knows your industry well. Compare prices of three firms with varying sizes. —Abbie Billings
I am a new mom and a CPA and enjoy reading your blog, so I am very frugal myself. You do not need a high powered (i.e. high cost) accountant to help you as I am sure you are not dealing with complicated tax issues. I am working part time for an expensive firm, but also am self-employed doing taxes and bookkeeping from home. My goal is to be able to stay home with my daughter, but also contribute to the family budget. I am sure you could find someone like me that would be happy to consult with you and not charge the fees that come with the expensive firm. –Amy Ballantine
Determine if you need accounting services or just bookkeeping and see if a junior partner can take care of your needs just as well. –Bonnie Timmerman via Facebook
The main points I took home here are:
- You can save money with someone who has less experience or fewer credentials.
- You can seriously reduce your costs if you are organized (something I find true in life). For example, Tim Carmody said that 90% of his CPA fee can be spent on “scorekeeping,” which is translating raw data (like the proverbial shoebox full of receipts) into an organized spreadsheet.
- If organization is not your strong suit, you might save money by using a tax service which charges by the form (not the hour) like H&R Block. H&R Block might charge $225 for an income tax return, but if you are really methodical, a CPA could do it in 45 minutes for $180.
- Finally, tax prep fees are deductible the next year, so whatever fee you pay, it might be reduced by as much as 35% by deducting it from the following year’s taxes.
On my to-do list: find a good book on accounting to make sure I’m organizing my finances in the right way. If I want to cut my costs, I am going to have to give up the hand-holding and business consulting.
Personal Recommendations of Accountants for Hire
I was so overwhelmed with the prospect of finding an accountant that when readers gave me a name and a number, it was like they were throwing me a lifesaver in a stormy sea. It sounds melodramatic, but the fact is: we are faced with thousands of decisions every day, and when we are hit with too many big choices one after another, we shut down. It’s called decision fatigue.
So if you find yourself in my situation and just need someone to tell you, “Here’s my accountant. She’s good. Use her,” maybe this list will help. The accountants you see below were either recommended to me by readers or were the readers themselves who offered advice in this post:
Gabe Gayhart, CPA | gabegayhart @ gmail.com | 614-575-0544 | LinkedIn
“I just recently read your post about hiring an accountant. You might have everyone coming out of the woodwork to recommend an accountant, but I thought I’d throw this out there… My husband became a CPA about 3 years ago. He has worked for an electric company in Ohio for about 10 years in their Accounting and Finance departments. He’s been talking for a while about venturing out on his own but needs to build a client base first.” –Melissa Gayhart, owner of Wooky Baby
Timothy E. Carmody, P.C., CPA | 972-386-2814
“I am not a CPA but am married to one who specializes in taxes. He has clients around the US and overseas even though his practice is in Dallas, TX. His client list ranges from the single taxpayer to corporations, but his bread and butter is with growing entrepreneurs like you.” –Elizabeth Carmody (Tim is the CPA who offered a lot of the information that appears in this post.)
Jim Colitsas, CPA | Thomas Colitsas & Associates | 609-452-0889
“Last year, my husband tried to do our taxes on Turbo Tax, despite the fact that we both had self-employment income, plus I had income from another job. We ended up paying nearly $40,000. When my brother Jim, a CPA, reviewed our taxes, he got us nearly $10,000 back! If we’d let my brother (or my dad, also an accountant!) do our taxes last year, we’d never have had to pay that in the first place. My brother and dad’s practice specialize in self-employed folks like you and me.” –Michelle Marston
Rena C. Pitchess, CPA | Pitchess.com
“My hubby, my brother and I have all used the same woman for almost a decade. She is fantastic. So down to earth, extremely smart and more than fair with the rates she charges. Rena Pitchess is her name, find her here if you like: Pitchess.com.” —Autumn Penaloza
Abbie Billings | abillings @ mn-cpa.com | LinkedIn
Abbie is a Frugal Mama reader and CPA candidate who contributed advice to this post.
Amy Ballantine Ellis, CPA | amybellis @ nc.rr.com | Raleigh, NC | 910-231-3831
Amy is a Frugal Mama reader and CPA who contributed advice to this post.
How to Get Accounting Services for Free
Tim Carmody pointed out that, if my husband had used a medical billing service (he doesn’t), they might throw in free tax prep as a bonus for using their company. Here are some more ideas from readers:
Find an accountant to know personally or has a passion for your business that simply can be your go-to question person without charging. It’s good to have lawyer and accounting friends. —Abbie Billings
It sounds like you probably just need some occasional consulting and questions answered during the year and then your taxes prepared at year end. You could maybe even offer a trade situation to a self-employed accountant in your area! –Amy Ballantine
Depending on income level or age, you can get your taxes done for free by an AARP volunteer in your community. My dad is a volunteer, and … it drives him up a wall often, but he adores it. –Christine Jesensky Bennett on Facebook
Some universities offer these services for free to teach their students which is also a more cost effective alternative. —Abbie Billings
I saw your comment about needing to find an affordable accountant and I wondered if bartering with one who you could offer an ad to would work, particularly since your blog is about money management. –Sarah Fernandez of Chateau & Bungalow
In the end, this is what happened. Melissa Gayhart, the owner of the small businesses that advertises on my site — a Netflix-style children’s clothing service called Wooky Baby — offered her CPA husband’s services as a trade for free advertising. How could I turn that down? (Gabe Gayhart‘s information is listed above. He is interested in expanding his practice, so if you need someone…)
Given that Gabe is in Ohio and I am in D.C., we are not going to be able to sit down across from each other and talk about accounting practices and ideas for improving my bottom line. But as Liz Carmody pointed out, while it’s always nice to “see your expert in the flesh, many CPAs will have clients with whom they have a long distance relationship. Thanks to fax, scanning, and Fedex the transmittal of information is less of a problem than days of yore.”
So I’ll check out a book about the right way to organize business expenses, but the tax prep itself is in the competent hands of a Certified Public Accountant. I’m so relieved, and grateful, to Gabe, Tim, and all the readers and friends who have helped me solve this once-challenging issue in both a frugal and high-quality way — right up my alley.
Final Words of Wisdom about Taxes — and Getting What You Need
The bottom line is get some help -– you don’t want the IRS sending you love notes! Oh, and 2 more cents –- get the help sooner rather than later –- accountants are anal and like to show you how to do things right from the beginning, not clean up a mess! –Amy Ballantine
For one last take-away from this experience, I think about the three steps for achieving goals. Figure out what you need, write it down (on a to-do list or a Facebook wall), then talk. The last step is the coolest part, because the world is just a better place when we cooperate and share. So if you tend toward introversion like I do, go against your nature. Reach out. Ask. Say hello to the person in line next to you. You never know what good will come of it. And it will always be good.