Stephen Sachetta
There are some tasks that the average adult can handle with no preparation beyond watching a YouTube video. Tying a bowtie, making a soufflé, changing a tire – they’re all things you can probably fumble through on your own, with no help from an expert. Your taxes don’t fall into this category. Yes, plenty of Americans manage their own financial and tax affairs without professional help. People with simple financial circumstances and limited assets may go their entire lives without consulting a CPA. But if building wealth and steering clear of IRS interference are your goals, you can’t do it alone. So when’s the best time to hire a CPA to guide you?
Timing the Hiring of a CPA
Is it time for you to hire a CPA? Take two major factors into consideration when making the decision.
What’s changed with your financial obligations? If you’ve made any significant financial moves in the last year, or if you anticipate making them in the coming year, it’s time to hire a CPA. Maybe you started, expanded or closed a business. Even if it’s a small one-person business that you run just on weekends, your business ownership status means you need the input of a CPA. Hiring a CPA is also in your best interest if you’re planning to start a new side business or become self-employed in the coming year, even if such a move isn’t yet certain.
Any number of other circumstances could affect your tax status, putting you in a position to hire a CPA. For example, hire a CPA if you recently bought, sold or rented out a property; if you’re preparing to send kids to college; if you’ve made significant changes to your investment portfolio; or if you’ve made changes related to your retirement or estate plans.
Also, if you’ve recently been contacted by the IRS about any issues related to your taxes, you need a CPA on your side.
What time of year is it? There’s no “wrong” time of year in which to hire a CPA. (That said, the beginning of April isn’t the ideal time!) You benefit from these services all year. But if you haven’t hired a CPA and the end of the year is approaching, you risk missing out on the opportunity to exert some control over next year’s taxes.
Before December 31st, you have some flexibility to make changes that relate to your tax status. You can amend your 401(k) contributions, adjust your tax withholding on your W-2, establish a Health Savings Account – all moves that may change how much you owe in taxes come April. Making those adjustments with the guidance of an experienced CPA allows you to realistically prepare for the next year’s taxes.
After December 31st, your tax obligations are locked in. Hiring a CPA in January will help you position yourself for minimal tax liability going forward, but it won’t much affect your responsibilities in April. You may be able to make some adjustments, like to your IRA if you meet certain qualifications. Generally speaking, though, by this point you’re going to owe what you owe. If you’re hoping to change your tax obligations for next year, you’ve got to hire a CPA before this year is over.
Hiring a CPA Firm
Tax planning represents the biggest value in working with a CPA firm for most people. So put a lot of weight on a firm’s tax experience when comparing your options. Some of the questions you might want to ask include:
- What kind of clients do you typically work with – individuals, businesses or both?
- Have you worked with clients in my same industry, or who have similar tax issues to mine?
- What’s your availability like, both during and outside of tax season?
- Will I work with the same person or small team to address my needs?
- How can your firm help me solve [tax problem]?
Don’t be afraid to ask a lot of questions when making the decision to hire a CPA. Some surprises are welcome. But when it comes to tax obligations, no one wants to be surprised. You deserve to know what to expect from the firm you hire, and what to expect from the IRS come tax season.
Sachetta takes a holistic approach to financial planning and tax services, which means we’ll help you develop the plans that position you for the life you want. Don’t wait to think about next year until this year is over. Contact us today.