Paying taxes and picking a CPA


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Issue 4 - March 2003

Paying taxes and picking a CPA
Watch out for the ‘Wild Bills’ in the accounting world
By Ivan Delman, DC

Picking out a CPA – certified public accountant – might not be on the top of your to-do list as you open your practice doors to the public. But if you think of your CPA as your “certified professional advisor” you might move that task higher on your priorities.

How to pick a CPA

Taking into account the mistakes I’ve made in selecting a CPA, I’ve compiled some criteria for picking a professional who can help you grow your business:

A CPA must be:
• More than a tax preparer. He must be experienced in the financial functions of a small business.

• Readily available most of the time. Steve became my CPA while I was on the West Coast. I have since moved closer to the East Coast. The distance posed no problem since by then we had established a good working relationship.

• Prepared to answer questions. And she shouldn’t charge you every time you say hello.

• Ready to push the envelope of the tax code. But you don’t want someone who will trigger an audit.

Once you have narrowed down your candidates, ask these questions to help you make your final decision:

1. How long have you been doing this work in this location?

2, How many clients do you have in the healthcare industry?

3. Who will be doing the work? Steve has one of his employees crunch most of the raw data. He then he double-checks the work and personally prepares the returns using the information we’ve discussed all year. He charges less for the bookkeeper’s time than his own.

4. Can I call you without incurring charges?

5. Now that you’ve looked at my last year’s tax returns, what are your comments about how they have been prepared and what you can do for me?

6. What successes or failures have you experienced?

7. Do you have any conflict of interests that would interfere with our relationship?

Of course, you may consider using the services of an enrolled agent (someone certified to represent you at IRS hearing), an accounting practitioner or an experienced accountant instead of a CPA. Ask the same types of questions.

Just remember to look out for the Wild Bills and Mr. Bigs. Check references and ask lots of questions before you let someone into your financial party.

My CPA is an integral part of everything I do regarding money matters. Whether it’s investments, large purchases or office expansion, my CPA is an important financial resource.

When I opened my own practice I had to pick a CPA qualified to handle the financial matters of a growing chiropractic practice and someone who could deal with a new chiropractor ignorant of finances.

I learned the hard way how to select a good CPA. Here are a couple of the mistakes I made, and what I learned from them:

CPA mistake #1: Wild Bill
A local businessperson recommended my first CPA. When I first walked into Bill’s office, I suspected I might be heading for problems. His filing system consisted of piles spread out all over his office floor. His answer to my questioning his organizational chaos was, “I remember everything in every file.”

Later, I discovered that he did have a photographic memory. But when he prepared my tax returns, he took tax law into a new dimension and my practice to the edge of the tax liability cliff!

I began to realize that a photographic memory had no relevance to ethical accounting practices. I became concerned about Bill’s handling of my deductions so I checked with a friend in the IRS who advised me that Bill was on “The List.” My friend advised me to pull my affairs away from Bill’s influence as soon as possible because, “The IRS Trouble Trolley was heading our way.”

Less than six months later, Bill disappeared heading in the general direction of Alaska.

My mistake? Not checking references. A few calls would have uncovered business people leery of his work.

CPA Mistake #2: Mr. Big

To select my next CPA, I decided to go for the best. I checked out a well-known accounting firm located in a high-rent district. This time I got references from my broker and several successful business acquaintances who used Mr. Big. He was both a CPA and noted tax attorney.

After he acknowledged my presence and with a wave of his hand, we spent 30 minutes discussing my financial matters. I decided to use him. A week later, I received an invoice for the 30-minute talk. That should have been my first clue. As the year progressed, every time I called for advice, I soon received a bill for his time. They started to add up. After he had prepared my tax returns, we had a meeting to discuss the results. I almost went into cardiac arrest when I saw the amount of taxes I would have to pay. In a panic, I took Mr. Big’s return to a local CPA (Solid Steve). I knew he took care of several MDs in town, along with a number of successful small businesses. After he audited Mr. Big’s returns, Steve pointed out several missed areas, which would have substantially reduced my tax liability.

Steve said with a recalculation, I would have to pay less than a third of the taxes Mr. Big had calculated. With proper tax planning, my taxes should be a wash for the following year. I threw away Mr. Big’s returns and started with Solid Steve.

My mistake with Mr Big? Several...

• No healthcare clients. I didn’t ask him if he had any other healthcare providers who were clients. (I later found out that he was mainly an entertainment attorney.)

• Billable hours. The people who referred me to him were very tax-knowledgeable and didn’t have to ask Mr. Big questions all year long. I needed to ask a lot of costly questions.

• No personal touch. Last, I discovered that Mr. Big didn’t personally work on the tax return. Someone else did it then he quickly reviewed and signed it. Our costly conversations during the year were wasted since Mr. “B” hadn’t passed that information to his associate.

I have been with Solid Steve for quite a few years and my taxes are always minimal, if at all. The moral of this: Ask the right questions. Get references. You’ll avoid the Mr. Big’s and Wild Bill’s and get yourself a “certified professional advisor.”

Ivan Delman, DC, is the author of The Business of Chiropractic: How to Prosper AFTER Startup. He can be reached at Ivan@businessofchiropractic.com.

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