How to Know if You Have a Good Tax CPA

How to Know if You Have a Good Tax CPA

I’m not a carpenter, but even my untrained eye can see if there are significant issues with a builder’s work: cracks in the foundation, crooked walls, sloppy paint job, etc.  

With a little coaching, I could take the analysis further: 45s vs 90s on window trim, 2×4 vs 2×6 walls, glue on subfloor sheeting, siding lining up at corners, etc. 

Tax preparation and returns can be trickier to evaluate. Here are some tips for evaluating your tax CPA’s work:

1. E-filed returns.  If your CPA firm is still paper-filing, very bad sign.
2. Tax CPA asks multiple questions and even stops by your business.  If you send in your records and don’t hear anything until the tax return is complete, that is a very, very bad sign.  Your tax CPA should be asking about a lot of things—energy and R&D credits, fuel tax credits, depreciation options, vehicle usage, ownership changes, 100% deductible meals – and the list goes on.   A well-prepared business tax return requires significant interaction between the CPA and business owner(s).  
3. Delivery of adjusting entries and final trial balance after tax work complete.  Many poor tax firms simply crank out a tax return and never give you entries so you can make your books match theirs.
4. “Balance Sheet per Books” on your partnership or S Corp tax return matches your books. Go to Page 5 (Schedule L) on your tax returns and compare that balance sheet to the one you have in QuickBooks (or whatever accounting software you are using).  They should agree to the penny, or there should be a clear explanation.  
5. Delivery of a “tax worksheet.”  Good firms have a method to bridge from the net income in your accounting software to the tax return net income (if they are different).  That method usually takes the form of a tax worksheet, that you can request.    

Getting a second opinion from a different tax CPA can also be helpful.  Caution: It’s common for one professional to enjoy finding holes in another’s work.  Often these “holes” are simply style points that do not have any impact on actual tax due.  The holes should be true holes.   

What points are not indicators?  

1. Speedy service.  Some of the shoddiest firms can quickly slap a return together over the weekend to keep you happy, but it’s a disaster.  The best firms take their time to get it right. 
2. Amount of tax due.  Many entrepreneurs feel they have a bad CPA if they don’t get a refund on April 15^th.  The exact opposite is generally true.  An excellent CPA firm will help you delay tax payments as long as possible.  If on April 15^th you owe tax, but no interest and penalties, that is an ideal scenario, because you have paid your tax on the last possible day.  Of course, If you owe interest and penalties—and it’s not due to your poor planning!—then it’s time for a different discussion.  
3. Low preparation fees.  Taxes are one of the largest overhead expenses for a profitable company.  A cheap tax preparer often costs you more in the end.