You need an accountant or tax preparer involved in your business to help you make unemotional decisions based on the numbers, to help you file your taxes every year, and to help grow the business. Over your lifetime, taxes are one of the expenses that you'll spend the most money on. You have too much going on to keep updated on the latest tax information. So find someone intelligent, knowledgeable, and trustworthy on your team. Someone who will be able to communicate with you professionally.

An accountant is a generic term that describes anyone with an accounting degree. But be warned that not all accountants and business advisors prepare tax returns. Plenty of accountants do audits or attestation work and don't touch taxes. And there are plenty of accountants and CPAs in the corporate world that do nothing with taxes. Tax preparers are split between two distinct designations, CPA and EA.

A Certified Public Accountant (CPA) is a state-licensed accounting professional designation earned by passing a four-part exam and complying with education and experience requirements. Most states require at least a bachelor's degree and two years of public accounting experience in addition to passing the four-part exam. The exam covers Financial Accounting and Reporting, Audit, Business Environment, and Concepts and Regulation. So it's a lot more involved than just taxes. Once the CPA exam is passed, no other formal tests are required to be taken. Only continuing education hours are required to be earned every year.

An Enrolled Agent (EA) is a federally-authorized tax practitioner who can provide tax advice, file tax returns for individuals and businesses, and represent taxpayers before the IRS. To become an enrolled agent, one must pass a three-part test, apply with the IRS and pass a background check.

The main difference is that a CPA that practices tax likely specializes in tax and other accounting functions, like audits, reviews, and non-profit work. An EAs main focus is taxes and helping taxpayers comply with the IRS guidelines.

So make sure when you're interviewing accountants, CPAs, and EAs that you want to work with, you fully understand what they're going to do for you, how often they want you involved, and what you can do to lead to the best relationship possible. Make sure that you understand what they do for eight hours every day and whether or not their work and focus are what your business needs.

While your accounting team might not be W-2 employees of your business, they're very important for the future of your business. To ensure that you are on a good financial path and that you have accurate and complete financial data.

Bookkeepers will ensure that your books and records are up to date, but your accounting team will help you interpret those books and records. They're the team that will help you steer the ship when the waters are tough and will be there to celebrate along with you when milestones are reached, and goals are achieved.

TRUST

Choosing an accountant is a very personal decision. They'll know how much money you make, what personal investments you have, what ventures you tried this year but failed at, and where you're spending your money when you finally hit on something that made you a ton of money. Most people don't like switching accountants because there is a benefit to having a long-lasting relationship with the same accountant. They can help you plan for the future and strategize avenues to explore like retirement savings, tax credits, what to do with that stock before the capital gains rate changes again, and which year you should sell that investment property and take the tax hit.

It's important to find someone that you can be open with and trust. You're going to have questions for them that might be farfetched or make you look silly, and you can't let that stop you from asking. You will have to have uncomfortable conversations, so it should never feel like a struggle to pick up the phone. The good news is that since the internet is like 60 years old, the accounting profession is finally getting online. We have LinkedIn, Google Reviews, and Facebook pages, and some of us even have TikTok. So research them online. See what other businesses or individuals are saying about them. You can even reach out to those businesses to follow up and ask questions about their experience and what to expect.

Talk to the accountant candidates you've selected a few times, in person or on video. Make sure they look professional, trustworthy, and honest. Try to pick up on their demeanor and attitude towards you, your story, and where you want to go with your business. If you already get the vibe that you're wasting their time, that probably won't change as your relationship progresses.

KNOWLEDGE

Things are changing so fast recently in the tax world. So you need to make sure that your accountant is keeping up and can explain how your business is affected, what you can do to better position yourself for the next two to five years, and what you can do to achieve your goals.

Obviously, they should be able to differentiate the tax treatment of business meals, personal meals, and travel meals, but the knowledge has to extend beyond that. They should be able to make recommendations about your COGS, whether or not your workers are independent, and those types of more common scenarios. But they should also be able to look at your business as a whole and suggest how your entity setup might not be right for you. Or if you want to take a set salary every other week, and have taxes withheld on it, how much you'd have to generate to make that happen, how your entity structure would have to change, and what would be required of you to make that happen.

Your accountant shouldn't just be entering in your tax information, spitting out a tax return, and sending you on your way until next year. We have so much more to offer to you and your business than that. So find someone that can give you the guidance you're looking for.

I can assure you that not all accountants are equal. You can give your tax information to two EAs and two CPAs, and I'd be willing to bet that none of the tax amounts owed would match each other. Tax preparation is not a commodity. You get what you pay for!

COMMUNICATION

Accounting is the language of business. You need your accountant to interpret that language into English for you for at least a few meetings. Eventually, you'll start to pick up on the language because you will have heard the terms before, like assets, deductible expense, liability, equity, gross profit margin, net operating income, Officer's Salary, Multi-Member LLC, etc. But in the beginning, you have to make sure that your accountant can communicate with you, explain it to you like you're five, and make sure that you can understand them.

There's nothing wrong with asking an accountant to explain the difference between a Single-Member LLC and a Sole Proprietor when interviewing. Or asking them the taxability difference between a COGS expense and an Overhead Expense? See how they answer it, see if you understand what they're saying, or if they're talking too fast, or droning on too long. You're likely going to be asking this person HUNDREDS of questions that are way more complicated than that. So make sure you can even stand the listen to that person. I've worked with a few accountants that could go on for hours about a question as simple as the difference between a Sole Prop and SMLLC.

Overall communication is important but also, how frequently would they suggest you meet? Just once a tax time? That will be pointless if you want to plan for taxes. You should meet with your accountant at least twice a year. Usually, three times is a sweet spot, and four if you have a ton going on. Multiple meetings every year means you can project your tax liability, pay in some money while you still have it in your bank account, and get ahead on your taxes because when you get behind on your taxes, it's hard to get out from under that. Ask them how often they meet with clients in similar industries or similar business setups. Make sure that fits with what you're looking for.

And make sure that you understand their preferred method of communication. If you have a quick question, should you schedule a call, shoot them a text, email them? How long should you expect to wait? You should have this information upfront so that you're expectations are set for both parties.

It is very important to make sure that you are 100% comfortable with who you are hiring to be your guide through the financials and taxes of your business and your personal life.