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Is Hiring a CPA Worth it? 5 Tips for Getting Your Money’s Worth

Tax-accountantOften when people find out I’m a tax accountant, I get asked, “How much does a CPA cost?”  It’s like me asking “How much does a home cost?” We all understand that a 1,000 square-foot home in Kansas has a different cost than a 1,000 square-foot penthouse condo in New York City.  The same concept applies to CPAs.  

The answer to both questions is the same:  it depends.  For example, my uncle has a simple tax return and pays $250 in preparation fees.  On the other hand, I had a client whose return took over a week to prepare when I worked in a large firm, which cost the client around $100,000. 

A good CPA may cost you more upfront but will pay off in the long run because he or she is thorough.  Anyone can drop numbers in software.  However, a CPA will analyze the situation to look for tax savings opportunities and help you plan for next year – in short, they become your trusted advisor.  I once had a client whose former preparer had cost her an additional $4 million in taxes because he didn’t consider accelerating her fourth quarter estimated tax payment to December from January.  

If you are on a budget (and who isn’t?), there are actions you can take to make working with a CPA more affordable:
  • Build a Relationship: If you are comfortable with your CPA, stick with them.   By working with the same CPA each year, they become familiar with your situation and can quickly spot discrepancies or big changes. One year, a volunteer preparer didn’t ask my aunt for her real estate property taxes because he didn’t see a mortgage statement.  A year-round CPA would have known to ask.
  • Be Organized: Generally CPAs charge by the hour.  If you have a lot of contributions to deduct, consider providing a simple spreadsheet with the donations listed along with documentation.  This could lower your bill considerably.  A client once provided a co-worker with a large box of bank statements with a belt tied around it – this is an expensive way to claim your donations!
  • Don’t Make Assumptions: A client knew he could gift each of his kids and grandchildren $13,000 without triggering any gift tax in 2010.  For 2011, he incorrectly assumed inflation had increased the gift tax exclusion to $13,500 and wasn’t expecting to pay for gift tax return preparation.
  • Consult your CPA in Making Decisions: In 2009, a client decided to buy two cars in one year.  He wanted the hybrid tax credit so he purchased a Toyota hybrid and a Smart Car.  What he didn’t know was that Toyota hybrid no longer qualified for the tax credit.  Had he consulted me, I could have advised him before the purchase and provided a list of cars that still qualified.  It was heartbreaking to let him know he wasn’t going to get the tax credit.
  • Don’t Lie to Your CPA: It’s like lying to your doctor, it only hurts you.  Sometimes clients can be embarrassed to share information like gambling earnings or certain medical expenses.  Your information is private and helps your CPA determine the best way to claim that expense or report those earnings.

So if you want to ease your stress, save money and work with someone who understands and keeps up with tax law, consider a CPA. If you are asking yourself if you should hire a CPA, I happen to think a CPA is a wise investment. For help finding a CPA, go to the AICPA’s 360taxes.org, which offers tax resources, tips, FAQs, checklists and much more. 

Melanie Lauridsen, Technical Manager - Taxation, American Institute of CPAs. Melanie is the staff liaison for the AICPA’s Tax Practice Responsibilities Committee, Exempt Organizations Tax Technical Panel and the Tax Checklist Task Force. Her public accounting experience includes working for PriceWaterhouseCoopers, where she provided tax expertise to high net worth individuals (clients with an average net worth of 125 Million) and privately held companies, as well as public accounting at a regional firm.  Melanie has her Master’s degree in Accountancy from the George Washington University and her Bachelors in Economics from Brigham Young University.

Tax accountant image via Shutterstock

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