20 Questions to Ask When Hiring a CPA

When individuals and businesses decide to hire a Certified Public Accountant it is a good idea to shop around. After all we are talking tax preparation and wealth creation, two very important aspects of a healthy financial present and future. So when choosing a CPA it is advisable to question your candidates to determine if their services will work for you. Here are 20 important questions to consider when hiring a CPA.

#1 Based on my last tax return, am I paying too much too little or the correct amount? Most business owners pay more in taxes then their actually liability. 

#2 What services do you offer other then tax preparation?

#3 Do you receive annual professional education? The tax code changes annually and correct interpretations of new law are vital to proper tax preparation and wealth management. 

#4 How long have you been a Certified Public Accountant? 

#5 How timely is your service? Tax information can become out of date very quickly. With the exception of annual information tax data should be updated at least every thirty days.

#6 How quickly can you respond to questions? A good CPA will return phone calls and emails within 48 hours.

#7 Are you available year round? Many tax preparers work seasonally and may close their offices for several months a year.

#8 What are your hours of operation? It is important to be able to call your CPA during hours that are convenient for you.

#9 Will you be the only person I work with or will others be meeting with me? It is best to build a relationship with one advisor.

#10 Will my accounts and computer be serviced by my primary advisor or will Jr. staff be involved.

#11 How can you help me make more money? A proficient CPA will have reviewed your financial information and have suggestions on how to improve your financial future.

#12 Are you tech-savvy? Accounting software is only as good as the person who installs and runs the application. A good CPA will help you set up your books and instruct you on how to input data, and then review the data for accuracy. 

#13 How have you integrated computers, internet and technology in general to your practice? Has it helped reduce fees and increase service to your clients?

#14 What professional organizations are you a member of?

#15 Are you a member in good standing with the state's CPA governing board. Before hiring any financial partner check to make sure they don't have any complaints or actions against them. 

#16 Who are your other clients? It is important to know your CPA has experience dealing with your type of business.

#17 Do you have any conflicts of interest? If a CPA represents your competition there should be measures in place to deal with any conflicts.

#18 How do you calculate fees? You want to avoid surprises and any disagreements about how and for what you are billed.

#19 How can I help you service my account and keep fees to a minimum?

#20 Why should I partner with you and your firm? A good CPA will not only demonstrate proficient understanding of your finances but also be invested in your continued success.

Choosing a CPA can be daunting especially if you are not well versed in accounting jargon.  A good CPA will make an effort to personalize the process and provide clear easy to understand advice. Tom Bulger, CPA has been helping individuals and businesses thrive for over 25 years. Contact Tom Bulger and find out how he can help you grow and protect your assets.

Did we miss any important questions to ask when hiring a CPA? We appreciate your comments and suggestions below.

How long should I keep records?

IRS requirements for retaining tax related documents vary greatly depending on the event, expense or action the document records. Determining the proper length of time for each record can be confusing to taxpayers causing them to just save everything, resulting in a mass of unneeded paperwork.

Generally income tax records properly filed should be held for three years, however the IRS suggests keeping a copy of your tax returns indefinitely. Employment tax records have a four-year threshold from the payment date. Claims for credits or refunds should be retained for three years and claims filed for losses from worthless securities and or bad debt deductions require a seven-year retention. Retention periods for documents connected to assets like property are tied to the year in which you dispose of the property in a taxable disposition, however, you must retain records to account for depletion deductions, depreciation, or amortization so you can report any gain or loss when you sell or dispose of the property. While these are basic, general requirements they are not without caveats and this is where a qualified and experienced tax preparer can guide the taxpayer in proper document retention. 

Taxpayers should also consider which records must be retained for non-tax purposes. Agencies other then the IRS, like insurance providers or creditors, may require longer retention rates then the IRS. 

Another important consideration for taxpayers is the security of their retained documents, and the ability of family members or representatives to access the documents in the case of an emergency. All sensitive and irreplaceable documents should be kept safe from fire, flood and especially burglary. You may think no one is interested in your tax return; however, identity thieves are interested in your tax refund. All a thief needs is your social security number to file a fraudulent tax return and cash that refund check. The IRS reports that since 2008 tax return identity theft is up 650%, with over 650,000 cases currently unsolved. A safe or safety deposit box is a good solution for sensitive records and or where the original paper document must be retained. Scanning and securely storing digitized copies of these documents is another good measure against permanent loss, but those records should also be securely stored. 

Again, make sure a designated family member or representative knows how to access your vital documents in a time of crisis. Qualified estate planners and tax professionals in addition to helping you protect your assets can help you determine which documents you must retain and should be held under lock and key as well as creating an organized system for your financial records management.

The U.S. Tax code is currently 4 million words long. IRS provided guidance to filing taxes and all the requirements for document retention, stands 1 foot tall when printed. Since 2001 there have been 4,680 changes to the tax code, this averages to about 1 per day. It is no wonder that a majority of U.S. taxpayers hire a tax professional to prepare their returns, plan their estates and guide them in asset management. 

Think you know what tax documents to keep and what to toss? Ever been wrong?  

Check back for our next post on Twenty Questions you should ask when hiring a CPA.

Estate Planning and Tax Updates for 2013

Estate tax law has always been complicated and rife with annual changes keeping taxpayers and preparers scrambling to keep up. This has been particularly true in the last few years with the uncertainty of tax cut renewals or repeals and possible changes in estate and gift exclusion rates. Congress eliminated the sunset provision of the 2012 American Taxpayer Relief Act (A.T.R.A.) removing lingering ambiguity; however, there are still many changes to the tax code regarding estate taxes that should be considered when planning your financial future and that of your heirs.

Increased Maximum Tax Rates and Permanent Exemption Amounts

The total amount of taxable gifts (i.e. gifts that do not qualify for the annual exclusion ($14,000 in 2013) or the unlimited educational gift tax exclusions or medical expenses) that individuals make for the duration of their life without paying a Federal Gift Tax is known as the Federal Gift Tax exemption.

Property transferred at death excluding transfers to charities and surviving spouses that exceeds the unused portion of the decedent's lifetime exemption amount is subject to Federal Estate Tax. Therefore, the Federal Estate Tax exemption amount available at death is reduced by lifetime taxable gifts. Deciding on the amount of lifetime gift exemptions one uses before transferring an estate VS. at the time of estate transfer, is a perfect example of why choosing a highly qualified and thoughtful Estate Tax and Gift planning professional is so vital.

The U.S. generation-skipping transfer tax (GST) levies a tax on transfers in trust and outright gifts to related beneficiaries who are more than one generation removed from the donor, like grandchildren. It also applies to unrelated beneficiaries that are more than 37.5 years younger than the donor. However, for the GST to be applied the transfer must have avoided assessment of estate or gift tax at each generation level.

The Federal Estate Tax exemption amount and the Federal Gift Tax exemption amount of $5,000,000, are permanently unified by A.T.R.A. 2012, and are indexed for inflation. Federal GST tax exemption is now permanently set at an equal amount to the Federal Gift Tax exemption and the Federal Estate Tax exemption. Exemption amounts for 2013 are forecasted to be $5,250,000 according to the latest inflation data with a unified credit amount of $2,045,800.

The A.T.R.A. of 2012 establishes a 5% increase from 35% to 40% to the maximum tax rate for lifetime gifts and transfers and for decedents passing on or after January 1, 2013 when the Estate is in excess of the exemption amount. 

Permanent Portability of Unused Exemption Between Spouses

A.T.R.A. of 2012 permanently allows a Personal Representative of a deceased spouse's Estate to choose to allow their surviving spouse to use the unused exclusion amount (DSUE) of the deceased spouse's that remains at death, known as "portability". This allows the surviving spouse to use the DSUE amount against any tax liability from subsequent transfers at death or lifetime gifts. To take advantage of the portability an Estate tax and GST form 706 tax return must be filed for the deceased spouse's Estate.

How the Act Affects You

The 2012 A.T.R.A. changes include the largest permanent exemption threshold in U.S. transfer tax history against GST, Estate and Gift tax liability. With the increased exemption amounts, low interest rates, the continued viability of Grantor Trusts, Grantor Retained Annuity Trusts and valuation discount planning, it is a great time to contact Tom Bulger, CPA, who is an expert in estate tax and planning to explore the various and significant opportunities currently available with regard to the transfer of wealth. Now is the time to make sure your Estate and Gifting plans are still effective at reducing your estate's tax burden and are appropriate for you and your beneficiaries. 

What do you think of the changes to the American Taxpayer Relief Act? Leave a comment below and share your thoughts.

Check back for our next post on retention periods for Tax records and other financial documents, and some tips for best practices in keeping your vital information organized, accessible and secure.