Paying a good CPA for their services will make you wealthier, and I will prove it to you.
You might have done your own taxes when you worked part time in high school or college, and even later as you had your first job.
Maybe you still do them today? But if you are not filing a 1040 EZ (filed by folks in the simplest of all tax situations), and you have been building wealth for a few years now and have investments and are involved in other endeavors such as a side business, I highly recommend you get yourself a good CPA.
A good Certified Public Accountant (CPA) does not mean going to H&R Block. Preparers at H&R and similar shops are not qualified CPAs. CPA requirements are rigid and not within everyone’s reach. That said, a good CPA is not cheap. However, a good CPA will definitely help you expedite your financial progress in life. Don’t believe me? Understand how much you are truly paying in taxes, and then realize how much less you can be paying by taking advantage of all the favorable tax laws.
A good CPA will always be on top of recent tax legislation and ensure that you get as much benefit as your tax situation allows you to. The fees you pay are well worth the tax planning advice you can get, the tax savings as well as freeing up hours of your precious time. Not to mention all the stress and headache you will live without.
1) A good CPA can help you incorporate your business, therefore protecting your personal net worth (assets) from frivolous business related issues, and at the same time enable you to spend pre tax dollars on business expenses rather than post tax dollars like the majority of the world.
2) A good CPA can help you reduce your effective income tax rate beyond your imagination. While the rest of America pays up to half their income to the Government, you can be paying 5, 10, 15, 20 or more percent less and thereby getting ahead in life faster than the rest.
3) A good CPA will help you comply with Self Employment Taxes, another convoluted set of taxes that many do not understand and end up overpaying on. If you are an entrepreneur or going to be one, whether full or part time, hiring outside help is the fastest way to expedite your business’ growth. In fact for many it is inevitable, unless you are a Superstar and know how to do everything. Not to mention have all the time in the world to execute.
4) A good CPA will help you comply with IRS tax form 1099 reporting requirements for your business. If you are going to grow your business, you will at some point need outside help. Paying contractors and subcontractors for services rendered to your business triggers a form 1099 requirement. The good news is that all business expenses are 100% deductible. A good CPA will help you take full advantage of that as well.
5) A good CPA will advise you on how you can save more in a 401k plan than is legally allowed. If you have a side business, may it be a brick and mortar one, a website or blog, a good CPA can help you set up a SEP investment plan, or another similar alternative for persons who own their own business.
These are just a few examples. There are many more benefits to having a qualified CPA by your side. To extract even more value, make sure you pick one who understands your business. For example, if you have rental properties, select a CPA who has experience with tax matters pertaining to rental property investing.
Making money from a website or blog is a relatively new trend, and some CPAs are establishing a niche in serving clients with tax needs pertaining to their online income. If you are generating profits online, select a CPA who understands the tax situation that applies to someone who makes money online.
Trust me when I say that the few hundred or even thousand bucks you spend on a good CPA is definitely well worth it for the various reasons discussed above, and then some. A good CPA by your side is guaranteed to expedite the growth of your net worth. This is precisely what Robert Kiyosaki preaches as well in Rich Dad Poor Dad.
And if you have your guard up, no worries, this is NOT a self advertisement at all. I only have a handful of clients who I work with, and I am not cheap by any means either. So I don’t recommend me at all unless you want to pay up a storm.
As your tax situation starts to get more complicated, think about the incremental time and effort you need to spend on tax compliance. You can either spend hours to research new tax legislation that is relevant to you and do your taxes, or you can hire a good CPA and get them done better and much quicker. A CPA salary will more than pay for itself.
By taking the latter route, you will not only free up a ton of your time, but also relieve yourself of the stress (for most people) and hassle involved with tax compliance. Many people hate accounting and taxes. They find it boring, mundane and a hindrance to accomplishing their business and investment objectives. So work on your business instead, not in it.
Readers: Do you have a good CPA? Do you do your own taxes? Why or why not? What will it take for you to hire one?
When I went into my own business 25+ years ago, I had a team of professional advisors. They were my CPA, Attorney and banker. These three people are very important to your success. In addition, the small fee I pay my CPA to prepare my tax return entitles me to call during the year and ask questions.
Agreed, it can be well worth the “investment”. especially in a complex situation such as yours.
Congrats on nearing 6000 readers. By the way I am new to the Yakezie Challenge and wanted to drop by and congratulate you after reading your blog.
Thank you Jai I appreciate the well wishes. Please voice your likes and dislikes about the blog, as well as topics you’d like to see discussed in more depth. Looking forward to your thoughts.
Terrific article and a very important subject. I totally agree with you. I had a small business and did not hire a CPA until the 3rd year. We ended up refiling my first two years to reap some incredible savings and tax advantages. If you have and want a professional business, then you best be looking for a good CPA to set it up and keep it going. Thanks.
Good point Ann. Sometimes we think we have it all covered, but having a second set of eyes, especially that of a professional that does it for a living mostly helps.
I don’t yet have a CPA but it will be something to look into in a few months when cash flows can justify it!
Of course – A CPA may be uncalled for for starters and less complex tax situations. Hopefully your situation gets real complicated real soon 😉
Good to see you here!
How do you go about finding a good CPA? I used one about 10 years ago for my business and found that I was doing all the prep work and he was just filling in the forms. I then switched to TurboTax and had no complaints thus far, but maybe I just don’t know what I’m missing…
Welcome to the blog Gary. The answer depends on how complex your tax situation is. Many do their own using TT but retain a CPA for advice/consultation. Finding a good one is a matter of trial / error and involves time investment. It’s best to have someone in a similar situation as you recommend one that they are happy with.
I like the CPA article. perhaps a second article on tax paperers who are not CPA’s or EA’s. There lack of training can be a big issue.
interesting suggestion. tell me more – what attributes should be covered in this article?