Do You Really Need an Accountant? 

Today, with the dropping prices of computers and the popularity of computer software driven accounting and tax packages, many people are asking themselves “Do I need an accountant?” The obvious answer (from my point of view at least) is of course everyone needs an accountant.

Seriously, many people can get by without an accountant or tax preparer. People whose financial situation is simple (wage earners, etc.) can get by with manual or basic tax preparation software. Programs such as TurboTax and others have come a long way over the years and are very good at extracting information needed to prepare your tax return. Programs like Quicken, Microsoft Money, Quickbooks and others allow small business owners to take control of their bookkeeping and organize their finances.

With this in mind, let’s address when you should consider seeking professional help and what kind of help to seek. There are several types of professionals to help you. These range from the basic bookkeeper, the public accountant, the enrolled agent, the Certified Public Accountant, and the tax attorney. Enrolled Agents are licensed by the IRS They can prepare your return and represent you in an audit or if there is a conflict between you and the IRS. Certified Public Accountant’s are licensed by the state after meeting certain educational or experience requirements and having passed a difficult test. They can prepare tax returns, represent you, prepare financial statements and perform financial statement audits as needed. Tax attorneys are also licensed by the state, pass a difficult exam and can prepare tax returns, represent you before the IRS and handle your case in court if it becomes necessary.

If you are in business and feel comfortable with keeping your own books, you will probably need an accountant only occasionally. The day-to-day things can be handled by you, but when unusual events occur, or when it is time for tax or financial statement preparation., you might want to turn things over to your accountant. If you are not comfortable with the bookkeeping, or if you are just too busy to take care of these things, accountants can take care of the bookkeeping for you.

Many people involve their accountants in their decision making. Should I buy or lease a car? Should I buy this piece of equipment now or later? How will the new tax law affect me? Should I incorporate my business? These are the kinds of things that make an accountant’s advice very valuable. Remember to ask your accountant’s advice before doing a deal and not after.

If you need financial statements compiled, almost any qualified accounting professional can perform this service. If you want an audit of your financial statements, only a Certified Public Accountant can do this for you. If you do choose to have a non-CPA prepare your financial statements or if you prepare them yourself, remember that a bank or other user of the financial statements may not give them as much credibility as if they were prepared by an independent CPA.

If the IRS calls you in for an audit or other examination, you should strongly consider letting your accounting professional represent you. There is much to be gained by keeping you and the IRS agent apart. If things don’t go well, you may need to hire an attorney to take your case to court, but usually things can be resolved by the CPA or other representative at a much lower level.

So the choice of when to hire professional help and what kind of help boils down to what you need to accomplish, how much of the work you can do yourself, and how much you are willing to pay to have someone else do the work. It has been my experience that a good accountant is often able to save enough in taxes and/or everyday hassle to pay their own fees. The key is to being smart enough to know when you have reached your own limits and to admit you need help.