Choosing a CPA: What to Look for
A Certified Public Accountant is a valuable member of any professional’s team. For many years, I have filed my own taxes. My tax situation was simple. During high school and college, there was a summer job. After college, there was a W-2 nursing job. During anesthesia school, there was no job.
My tax filing was basically transferring the recorded amount from the W-2 or 1099 onto the tax form formerly known as the 1040 EZ (which ended in 2018).
Upon becoming a CRNA, my time became more valuable to the marketplace, and I worked a lot. Even though my tax situation lacked complexities, my limited free time pushed me to find a local bookkeeper to file for me.
Mrs. TFC and I sat down with a local gal who did seemingly the entire town’s taxes. We arrived with our W-2s and a few 1099s. She entered our data into Quickbooks faster than I could have. $175 and 90 minutes later, taxes were done.
My 2024 tax situation is an entirely different arena. This was when I became self-employed and began contracting locum work. I knew I would need a quality CPA. For W-2 CRNAs without any side quests, most CPA firms can handle your tax situation. The 1099 crowd would likely stand to benefit from outside help.
Let the vetting begin.
TFC CPA Checklist:
Industry Expertise
Experience with LLCs and S-Corporations
Acceptable Risk Tolerance
Comprehensive Services
Responsiveness
Trust and Results
Industry Expertise
Find a CPA who works with those in your profession/domain/circumstances. Coworker recommendations are great. I found an accounting group who worked with self-employed CRNAs. For the sake of this entry, I’ll refer to them as PL.
These guys understood just enough about medical professionals to be dangerous. A detailed understanding of the tax code combined with a basic understanding of how 1099 CRNAs commonly operate is a recipe for tax efficiency.
Experience with LLCs and S-Corporations
I researched my situation prior to reaching out, so I asked a few loaded questions to gauge their responses.
I told PL I planned on working as a traveling CRNA, setting up an LLC., and filing as an S-Corp. I also shared my plans of establishing a Solo401(k) while concurrently utilizing megabackdoor Roth contributions, backdoor Roth conversions, and a Health Savings Account.
We also discussed salary, payroll, and distributions. We discussed business expenses and per diem expenses at length.
By this point, his recommendations matched what I had researched and envisioned. And he shared additional insight beyond what I had considered. This was all done over the phone prior to meeting in person.
It was this introductory phone call that caused me to pass on three other firms prior. Like healthcare professionals, CPAs specialize. Not all CPAs are for you and that’s okay.
PL’s experience allowed them to share strategies used with other clients. He provided guidance as to the interpretation of the IRS tax code. He shared his experience of what would hold up during an audit and what would fail.
Risk Tolerance
The tax code is an overwhelming document. I’m placing a great deal of trust in PL as we navigate the gray areas.
Here is a gray area…In recent history, low interest rates provided incentives to forgo quarterly tax payments in favor of investments. At the end of the year, a late payment penalty would be imposed. Because penalties matched the federal interest rate, they were minimal. This allowed financial arbitrage.
PL would discuss a strategy and address the pros and cons.
For example, anything can be utilized as a business expense. However, it’s your responsibility to explain the expense as “necessary and ordinary” to an IRS agent. If unable to sell your pitch, meet the penalty. PL discusses tax strategies with the thought of an audit at the back end.
If there is one person to not do wrong, it’s the IRS. You can present your argument by bringing attention to a specific line in the tax code, but tax law sets the precedent. It’s this loose interpretation of a single section of tax code where I see social media influencers mislead viewers.
Comprehensive Services
It’s great that a firm offers a list of services. I’ll add the caveat of honesty and transparency. It’s ideal to have a firm that takes care of all things accounting. There are branches stemming from accounting such as a tax attorney and a financial advisor. More on these later. For most situations, find a CPA firm that does accounting well and reach out when required.
PL has access to our books, provides us with estimated tax payments, and answers all of our questions. These guys understand small businesses, business expenses, and retirement accounts. That’s what I need.
While setting up my business, PL said they can do our payroll. Since I had never done payroll, I was interested. In the next breath, PL said it’s easy to do it yourself with QuickBooks and it will save $90 per month. Then they set a time for Mrs. TFC to meet with one of their accountants, so she could learn all things payroll. Really great!
Responsiveness
As with any working relationship, access to communication is key. Find out the desired medium of communication. Expect a reply during business hours.
It’s best to be proactive. Ask what you need to have prepared and when the firm needs it. Have your expenses documented, tax forms prepared, and questions at the ready.
You aren’t their only client and tax season is a busy time.
Trust and Results
It’s okay to look over your CPA’s work. It’s okay to compare your tax strategies with other CRNAs. The objective of this blog is to spark conversation to better the community.
Best case, your accounting firm is utilizing everything within the tax code to benefit you.
It’s not reasonable to leave a firm just because you don’t like your tax rate. If you owe taxes, it means you made money. If you owe six figures in taxes, it means you made great money.
It is reasonable to leave a firm because they do not utilize the available tools. Taxes are a game, and the tax code is the rule book. Play to your advantage.
It’s no secret we are herded like cattle into certain interventions. Things like tax-advantaged accounts, mortgage interest deductions, and real estate investments. Evaluate the pros and cons of each tax strategy and utilize what is in your favor.
**RED FLAGS**
Lack of Industry Knowledge
Only determined if you do your research prior to contact. Do they work with CRNAs or other medical professionals? Do they work with sole proprietors or LLCs? Do they work with high income clients?
If your situation is an outlier, move on.
Unresponsive
If you are waiting two weeks for a reply, find a new firm. Other groups will happily accept your business. Do your part to be prepared but remember who is paying whom.
Poor Educators
I recall in a video lecture by Jim Donovan of Goldman Sachs where he said professionals should NOT use jargon when working with clients. You should not use medical jargon with patients. Your CPA should not use jargon with you.
If you fail a teach-back situation after a meeting with your CPA, ask for clarification. If your strategy isn’t clear, find someone who can explain the topic in a way you comprehend.
Outdated Practice
The tax code is dynamic. Ensure your CPA firm is up to date. This requires you to be attentive to the media and ask appropriate questions.
Overpromise and Under Deliver
This is bad in any domain. These guys aren’t miracle workers. They must play within the guidelines set by the IRS.
Poor Follow-Through
Also bad in any domain. Did they prepare your tax estimates on time? File on time? Did they investigate that item you asked about? Was this completed within a reasonable timeframe?
Bad Reputation
If you hear people at work saying they changed CPAs, ask why. Run the firm through the checklist and see how they do. If undesirable, hopefully there are more firms to vet.
Summary
I’ll be honest about which professionals provide value and which don’t. I’ll be the first to say, it’s well worth paying PL thousands of dollars each year. ONE, their services are a business expense for my company. TWO, my time is better spent giving anesthesia. THREE, they utilize a team of people who do nothing but accounting work.
Time is a finite resource. Fortunately, my finite resource brings great value to the marketplace. I’m building a team of professionals to optimize my situation. Good help is expensive, but the value is worth the cost.
It’s important that the team is knowledgeable in their domain. Please use this checklist to vet a new or current CPA firm. If you have insight towards other green or red flags, please comment to help the community.
