How to Find A CPA

Everybody knows how to find a CPA . But very few know how to find a good CPA. And having a good CPA can make all the difference. Over the last 30 years as a financial advisor, I’ve seen the good, bad and (very) ugly when it comes to people who charge you for tax advice. I could write an entire book about how unqualified CPAs cost clients tens of thousands of dollars (or worse) each year. This runs the gamut of giving wrong direction on how to answer a letter from the IRS to CPAs giving crappy tax and investment advice. How do you make sure that doesn’t happen to you? In my experience there are 3 main considerations:

1. You May Not Get What You Pay For

If your tax situation is complicated in even the slightest way stay away from the low-end tax prep alternatives. These include doing it yourself, using a software package or going to a tax mill factory like HR Block or Hewitt. That’s not to say that these are always bad options. For some people, they are perfect. But I personally want a higher power tax pro when my situation demands it. (Don’t worry; I’ll give you a tip on how to know if one of these services is for you or not in a bit.)

On the other end of the spectrum, it gets even more frightening. That’s right. Just because you spend an arm and a leg for a CPA doesn’t mean he’s qualified in the least. One of my clients paid her CPA $450 an hour for years – only to learn that she paid $100,000 too much in taxes over that time period. Pass the Advil please.

Bottom line? Don’t go “El Cheapo” but don’t assume that you’re getting great advice just because you’re paying through the nose.

2. Referrals? Not so fast…..

Think about the client I told you about above. She loved her CPA – until she didn’t anymore. While she was in the dark about all the damage her CPA was causing, she blissfully gave out glowing referrals for this slob. Make sure your referral sources are good.

When you interview your candidate (explained below) ask if your return is simple enough to do yourself or use an inexpensive provider. An honest CPA will give you a straight answer and the reasons behind it.

Referrals are important but you have to ask the right people for referrals. Friends and family are great sources for referrals if they have some tax or financial expertise. If not, they can’t really vouch for anything other than whether or not the CPA is a nice person and if she returns calls or not.

Instead, get referral from professionals. Ask your attorney or financial advisor for potential CPAs to interview. The main point is that you want to get potential CPA names from someone who knows how this CPA works from the technical side. You want references from a person who would know about any professional problems or lack of qualifications. And remember that your situation might be very specific. Are you looking for a tax preparer or someone to provide business consulting as well? Talk about that to the professionals you seek referrals from.

3. Questions

Once you have a list of at least 5 candidates, prepare your list of questions. Your questions might include some of the following:

• What type of client do you focus on? Why?
• How long have you been in business?
• How long before you retire?
• What makes you different than other professionals?
• When do you need me to turn in my prep work in order to file on time?
• What are your charges?
• Do you offer audit protection?
• How many of your returns where audited last year?
• Have you ever been sanctioned by any professional boards?
• Have you ever had any complaints?
• How many clients do you have?
• How many clients left you last year? Why?
• How many new clients did you take on?
• Is it a conflict of interest for a CPA to sell investments?
• Could you provide me with 3 client and 3 professional references?

This list is a good start, but add your own questions and don’t be shy. You are about to entrust your financial future into the hands of this person so make sure you find out as much as you can beforehand.

And when it comes to questions it isn’t a one-way street. The CPA should ask you questions as well. She should try to get to know you. And if she doesn’t ask you anything but rather tries to impress you with her credentials, I suggest you end the interview and go meet with the next person on your list. If someone doesn’t ask about you, it means they really don’t care and don’t think of you as an individual. When it comes to doing your taxes, that’s a fatal flaw that cannot be overlooked.

Trial Balances

Once you find a professional you feel comfortable with, let her review your last tax return. Ask her to provide a price quote. But also ask for a critique. What would she have done differently? Why? Does she notice any errors or flaws or missed opportunities? Are there any audit red flags that need to be addressed? Do you have the right retirement plan? Are you maximizing all your retirement options?

This is where you’re looking for creativity, thoroughness and value-added. If this person isn’t going to offer anything better than what you currently have, keep looking and consider yourself lucky. It’s better to find that out now rather than waste time and money.

At the end of the day, you need to consider a number of variables if you want to find the right CPA. If you give yourself enough time and prepare adequately, you should have no trouble at all.

How did you find your last CPA? Was the outcome positive? Are you making a change this year? How are you going to find your CPA?