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Updated Mar 08, 2024

Is It Time to Hire a CPA?

Determine when it's best to let a professional handle your business's growth and financial well-being.

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Max Freedman, Senior Analyst & Expert on Business Operations
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While some entrepreneurs opt to file their own taxes or use tax software, these alternatives may not be the most secure or efficient options. Hiring a certified public accountant (CPA) to manage your accounting and tax planning might be an investment, but the potential benefits can outweigh the costs. The expertise and guidance a CPA brings to the table can be invaluable to your small business’s growth and financial well-being. If you’re contemplating whether it’s time to hire a CPA, several essential factors must be considered.

When to hire a CPA

If you can afford it, hiring a CPA is likely your best option under any circumstances. Trying to educate yourself on changing tax laws, understanding the various deductions you qualify for and staying current with filings can distract you from what’s most important: running your business. 

However, hiring a CPA is extremely advisable if your circumstances include the following: 

TipBottom line
If you're running a small business with a relatively simple structure, investing in one of the best accounting software solutions may be worthwhile. However, you must be confident in your ability to handle your company's finances and taxes.

What to consider when determining who should do your taxes

Consider the following before hiring a CPA – or deciding to go it alone: 

  • Your business’s current financial picture: Can you generate accurate and complete financial statements and records, including balance sheets and profit and loss statements? Even if you can, consider the time it takes to run all appropriate financial reports and how you can better spend that time.
  • Your knowledge of personal and company income: Do you know your personal income as well as your business’s income? Taxes can be complex for small business owners, and accurately delineating your income is crucial.
  • Your business’s accounting cycle and what it entails: Do you understand the accounting cycle and the steps involved in ensuring proper financial oversight of your business’s financial well-being?
  • Your business’s legal structure and unique tax considerations: What is your business’s legal structure? Sole proprietorships, C-corps, S corporations and partnerships are taxed differently.
  • The complexity of your business’s revenue sources: The more complex your revenue sources, venues (interstate or international versus local) and industry, the more you’ll need a CPA.
  • Your knowledge of tax laws and regulations: Tax laws and regulations change constantly. A CPA can help you determine the tax deductions you do (or don’t) qualify for and the specific tax rules your business must meet.
  • Your business’s unique financial complexities: Does your business have complex inventory or accounts receivable processes? A CPA can align your company’s specific situation with optimal tax filings.

Whether or not you hire a CPA, small business owners must consider taxes year-round – not just during tax season. A CPA can analyze your business’s operations or determine whether you qualify for certain deductions.

Pros and cons of hiring a CPA

Consider the following advantages and disadvantages of hiring a CPA:

Pros of hiring a CPA

  • CPAs make fewer errors. CPAs are accounting professionals. It’s their job to know and stay current on all laws, rules and regulations relating to accounting and taxes. Their knowledge helps ensure your company won’t fall victim to critical accounting mistakes that could come back to haunt it.
  • CPAs may be able to save you money. CPAs can help minimize your tax bill by taking advantage of all potential deductions and credits you can claim and advising you on tax planning and strategic decisions.
  • CPAs can save you time. On average, it takes more than 10 hours to complete an individual return; complex business returns can take much longer. Freeing up this time (and removing the accompanying frustration) allows business owners to focus on their core business competencies.
  • CPAs are adept at dealing with the IRS. If you’re audited or owe back taxes to the IRS, your CPA can help resolve the issue in your favor. Their knowledge and participation can minimize penalties, lower assessed taxes and give you more time to pay what you owe.

Cons of hiring a CPA

  • CPAs can be expensive. CPAs have more education and undergo a rigorous certification process, so they cost more than a tax preparer or bookkeeper. On average, small businesses pay between $1,000 and $1,500 to hire a CPA. When margins are tight, this expense may be out of reach.
  • CPAs have busy schedules. The months before tax day, April 15, are the busiest time of year for CPAs, followed by the months before the end of the year. Their attention will be split between your business and other clients, including some with more pressing needs. You may have to wait to get your questions answered, and your tax return could take longer to complete.
  • CPAs may be hard to find. There is a limited number of CPAs to go around, so you may have a hard time finding one – especially if you’ve waited until the last minute.
  • You must still handle day-to-day accounting. CPAs are the “big guns” of the accounting industry and usually don’t handle daily accounting tasks. You’ll likely need to hire a bookkeeper for standard accounting tasks (though some CPAs also offer bookkeeping as an add-on service).

Pros of hiring a CPA

Cons of hiring a CPA

Deep knowledge base

Expensive

Additional financial modeling support

Still requires adequate bookkeeping

Audit support

Limited availability

Ways to do your business taxes

There’s no getting around the fact that your business taxes must be completed. You can do them yourself, work with a third-party service or hire a CPA. 

1. Do your business taxes yourself.

While filing taxes involves many moving parts, it isn’t quite as challenging for business owners with a background in taxes or those who operate a small business with a simple structure. These businesses may do well with a top-notch accounting software platform. 

For example, Mark Aselstine, the founder of online wine club Uncorked Ventures, switched from using an accountant to doing his taxes himself. Aselstine found that his business’s simple structure allows him to categorize expenses easily and calculate tax totals.

“My [business] is … money in, money out, and we don’t carry a lot of inventory,” Aselstine explained. “It was going to take me less time to just do it myself rather than have to answer questions about how stuff should be categorized.”

Each month, Aselstine sits down and calculates his expenses; when tax time arrives, he has accurate, timely information at his disposal. He also tries to stay current with changing tax laws, although his business’s relatively simple structure makes this less challenging. Aselstine recommends that any business owner who wants to do their own taxes experiment with bookkeeping for a month or two before switching from a CPA.

TipBottom line
Consider using one of the best online payroll services to handle your payroll runs and all your payroll taxes. These providers are often affordable and ensure your business complies with appropriate regulations.

Pros of doing your own taxes with tax software

Cons of doing your own taxes with tax software

Inexpensive

Less audit support than professionals can offer

Interview-style format

Cannot override system defaults

Suitable for simple business models

May require additional research

2. Use a third-party tax service for your business taxes.

A third-party tax preparation service can be less expensive than a CPA while still taking the work off your plate. Popular tax preparation chains like H&R Block and Liberty Tax can handle business taxes. However, you won’t get the financial analysis a CPA can give you, and these services may not have the industry experience to understand your business’s optimal deductions and best filing options. For example, their software may use default settings for calculations, while a CPA might utilize alternative calculation methods. 

Ask any potential service how many business returns they handle annually to ensure they’re familiar with and proficient in scenarios like yours. It’s vital to look for a company and specialist with experience doing business tax returns. 

TipBottom line
Consider hiring a tax consultant if you need strategic tax planning and advice on complex tax issues.

Pros of using a third-party tax service

Cons of using a third-party tax service

Reasonably priced

Limited knowledge base

Convenient

May not be able to override systems for more favorable calculation methods

Good for simple business models

Limited audit support

3. Hire a CPA for your business taxes.

Trusting a CPA with your taxes can take an immense burden off your shoulders. While you could still technically be subject to an IRS audit, trusting a CPA educated on all the latest tax laws means that chance falls dramatically.

“I use a CPA to do my taxes and wouldn’t consider doing it on my own,” said John Kinskey, president of AccessDirect, a small business phone system company. “[Eliminating the headaches] of trying to keep up with all the shifting changes in tax laws – and just the sheer amount of detail required to file state and federal tax returns – is well worth paying a professional.”

Hiring a tax accountant or accounting firm means guaranteeing yourself a few advantages: 

  • You can spend less time worrying about your tax situation and more time handling business operations.
  • You can potentially save money by taking advantage of deductions you wouldn’t know about on your own.
  • You can ensure all your finances are current and that you’re in good standing with the IRS. 

Hiring an accounting firm is an obvious choice for complex businesses that can afford a certified tax professional and an excellent option for any small business that wants to reduce the chances of being audited and offload the burden and headaches of tax filing. 

 

Doing your own taxes with tax software

Using a third-party service

Hiring a CPA

Price range

Inexpensive

Moderate

Expensive

Audit support

None

Limited

Full 

Availability

Anytime

By appointment only

By appointment only

Taxes done for you

No

Yes

Yes

Help with business modeling

No

No

Yes

CPA FAQ

CPA prices range widely. A junior staff member at a CPA firm may charge as little as $60 per hour, while one who owns a firm may charge as much as $250 per hour. In some areas with exceptionally high demand and large client bases, the most sought-after, best-regarded CPAs may charge as much as $500 per hour.
Hiring a CPA is as simple as reaching out to one for a consultation. However, conducting research is crucial. Ensure the CPA you're considering has worked with other businesses in your industry. Determine whether you need a CPA solely for tax-filing purposes or larger tasks like budget planning and creating financial statements. Consult reviews to ensure your CPA works well with others, especially if you run a large business. Your CPA may need to contact your employees or clients, so you must ensure they communicate well.
Experience in your industry is the most important qualification to look for when choosing a CPA, but it's not the only factor. Find a CPA firm that's appropriate in size to tend to your needs and ensure the firm has ample services (and staff) to get the job done. Choose a CPA who will respond to your inquiries promptly, offer the services your business needs and gladly provide references from other clients.
The difference between a CPA and an accountant is simply a legal distinction. A CPA is an accountant licensed in their state of operation. Only a CPA can offer attestation services, act as a fiduciary to you and serve as a tax attorney if you face an IRS audit.
Consider hiring an accountant if your tax situation is at all complicated. You may also want to hire an accountant if you worry you won't have enough time to do your taxes on your own. In general, it may be smart to hire an accountant unless your business is a sole proprietorship with minimal overhead, costs or expenses.
An accountant who is not a CPA may charge less per hour than a CPA. Some accountants may have a bill rate of only $30 or $40 per hour, though others will cost more.
An accountant may be able to complete an individual tax return quickly, but the amount of work involved in filing a return depends on the number of forms you're required to report to the IRS. If you're a sole proprietor with just a few 1099-MISC or NEC forms, your accountant should need less time to complete your tax return. However, if you run a large business, you may need to wait a while. Regardless of your situation, even the busiest accountants can relieve the time burden of filing your taxes yourself.

Jennifer Dublino contributed to this article. Source interviews were conducted for a previous version of this article.

author image
Max Freedman, Senior Analyst & Expert on Business Operations
For almost a decade, Max Freedman has been a trusted advisor for entrepreneurs and business owners, providing practical insights to kickstart and elevate their ventures. With hands-on experience in small business management, he offers authentic perspectives on crucial business areas that run the gamut from marketing strategies to employee health insurance. Freedman's guidance is grounded in the real world and based on his years working in and leading operations for small business workplaces. Whether advising on financial statements, retirement plans or e-commerce tactics, his expertise and genuine passion for empowering business owners make him an invaluable resource in the entrepreneurial landscape.
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