Choosing the Right Financial Ally: 10 Questions To Ask When Hiring an Accountant For Your Micro-Corporation

Introduction

Over the past few weeks, I have been discussing the advantages of establishing a professional micro-corporation for self-employed physicians with several physicians. A micro-corporation classified as an S-Corp offers numerous benefits over being a sole proprietor, particularly when it comes to retained income. However, I have noticed that many doctors encounter CPAs who are unwilling to take the time to explain the advantages in detail. These CPAs often focus solely on completing annual tax filings for the doctors, without providing comprehensive tax planning services.

What you need is an accounting professional who proactively engages in tax planning, looking ahead in your life, rather than one who primarily reacts and looks backward. When you are in a reactive mode, it becomes nearly impossible to maximize the benefits of a micro-corporation taxed as an S-Corp, as you cannot retrospectively flow your income through it. Therefore, it is easier and simpler to continue operating as a sole proprietor and funneling your earnings through your personal tax identification number.

After spending time with many of you, helping to raise your awareness and business competence, I want to share that if you earn $40,000 or more per year as 1099 income, you can retain more of your income by setting up a micro-corporation. However, when this idea is rejected by your CPA, I often get asked the next question…because knowledge is power:

"Can you help me find a new CPA?"

Yes, of course I can assist you through my SimpliMD micro-business professional network. However, it is also crucial to review some important considerations and questions that you should ask when selecting your financial ally.

My goal in our community is to empower you through business competency. Understanding what questions to ask is part of that small business competency.

Embarking on the journey of managing a micro-corporation as a physician entails a multitude of responsibilities, and a skilled accountant is a crucial ally in this venture. As the president of SimpliMD and a fellow physician navigating the intricacies of micro-corporations, I fully grasp the importance of making well-informed decisions in financial matters. In this blog post, I will delve into the 10 essential questions that you should ask when hiring an accountant for your micro-corporation.

Before jumping in, please make sure you understand the following information about accounting professionals:

What's the Difference Between a CPA an an Accountant?

The terms "Certified Public Accountant" (CPA) and "accountant" are often used interchangeably, but they represent different levels of professional qualifications and responsibilities within the field of accounting. Here's an overview of the key distinctions between a CPA and an accountant:

• Educational and Licensing Requirements:

  • Accountant: The term "accountant" is a general designation that can be applied to individuals with various levels of education and experience. While some accountants may hold bachelor's or associate degrees in accounting or related fields, others may have gained practical experience through on-the-job training.

  • CPA: Becoming a Certified Public Accountant involves meeting specific educational and licensing requirements. Generally, this includes completing a bachelor's degree with a major in accounting, fulfilling a certain number of accounting credit hours, and passing the Uniform CPA Exam. Additionally, most states require candidates to have a certain amount of professional accounting experience and to adhere to ethical standards.

• Licensing and Regulation:

  • Accountant: In many jurisdictions, the title "accountant" is not a protected designation, and individuals can use it without meeting specific licensing or regulatory requirements. Accountants may work in various capacities, including bookkeeping, financial analysis, or tax preparation.

  • CPA: The title "CPA" is a regulated designation, and individuals must meet specific licensing requirements to use it. CPAs are licensed by state boards of accountancy, and they are subject to a code of professional conduct. To maintain their CPA license, individuals often need to fulfill continuing education requirements.

• Scope of Practice:

  • Accountant: Accountants may work in a broad range of roles and industries, including corporate accounting, government accounting, or public accounting. Their responsibilities may include financial reporting, tax preparation, budgeting, and general financial analysis.

  • CPA: CPAs have a broader scope of practice and are authorized to provide a wider range of services. This includes auditing financial statements, attesting to the reliability of financial information, and offering services related to tax planning and consulting. CPAs are often sought for their expertise in complex financial matters.

If you are looking for an all-in-one firm, a CPA firm is better than an accountant, because CPAs are qualified to do more, including representing you at a tax audit.

Now let’s jump into the 10 Questions you need to cover when interviewing an accounting professional whom you are considering hiring for your micro-corporation:

10 Questions For Your Micro-Business Accounting Professional

1. What Experience Do You Have with Healthcare Professionals?

   Micro-corporations in the medical field come with unique financial intricacies. Ensure your accountant has experience working with healthcare professionals, understanding the nuances of your professional contracting work, location independent businesses and the tax implications specific to high net worth individuals.

2. Are You Familiar with the Tax Regulations Affecting Physicians?

   Tax regulations for physicians can be complex and subject to change. A knowledgeable accountant should be well-versed in the latest tax laws affecting healthcare professionals, helping you optimize your personal and micro-corporation financial strategy while ensuring compliance with relevant regulations.

3. How Do You Communicate and Collaborate with Your Clients?

   Effective communication is essential in any professional relationship. Inquire about the accountant's communication style, frequency of updates, and how they collaborate with clients. Clear communication ensures that you are always informed about the financial health of your micro-corporation. Do you have access to them by email, phone, or both? How do you contact them for tax-planning meetings?

4. What Services Do You Provide Beyond Basic Bookkeeping?

   While basic bookkeeping is fundamental, a valuable accountant should offer services beyond the basics. Look for someone who can provide financial analysis, strategic planning, and advice on optimizing your micro-corporation's financial performance as well as strategies for maximizing your retained income.

5. Can You Assist with Budgeting and Financial Planning?

   Budgeting and financial planning are critical components of managing a micro-corporation successfully. A proficient accountant should be able to assist you in creating realistic budgets, forecasting financial trends, and developing a strategic financial plan aligned with your personal and professional micro-business goals.

6. How Do You Stay Informed About Industry Changes?

   The financial landscape is ever-evolving, and staying informed about industry changes is crucial. Ask the accountant about their commitment to ongoing professional development and how they stay abreast of changes in accounting standards, tax laws, and healthcare regulations.

7. What Technology Tools Do You Use for Financial Management?

   Technology plays a significant role in modern accounting. Inquire about the tools and software the accountant uses for financial management. An accountant utilizing up-to-date technology can streamline processes, enhance accuracy, and provide you with real-time insights into your micro-corporation's financial status.

8. What Are Your Fees?

   Ask how the firm bills clients and about billing options. Some firms bill on an hourly basis but firms will often have a flat monthly rate. I prefer the monthly rate as it is predictable and clear—but always ask what's included in a monthly rate. One CPA might define it to be posting cash receipts and disbursements in accounting software while another might also include preparing monthly journal entries, balancing the bank statement, and printing a profit and loss report for you. Rates alone should not be the determining factor in hiring a firm; you just need to know what to expect. One thing to note here, don’t try to be too frugal here—don’t be afraid to pay for professional services that ultimately help you retain more income. The return on investment is very high. Additionally don’t forget these services a business expense in your micro-corporation and paid efficiently with pre-tax dollars.

9. What Scope of Services Do You Provide? 

   Most CPAs and accounting firms provide a range of services, from assisting with monthly bookkeeping to payroll processing/payroll taxes, to taxes and audit representation. It’s beneficial to have a clearly defined scope of service that will be provided for you personally as well as your micro-corporation by this firm.

10. What Are Your Tax Philosophy and Tax Planning Priorities?

    Have a frank discussion about tax philosophy. Is this person cautious, assertive, or aggressive about taking deductions? A couple of good points to use as examples are CME & travel expenses, home office deductions, and home rental plans for micro-corporation owners (aka Augusta rule). Your CPAs style and philosophy should match yours. If you don't feel comfortable with this person's philosophy, keep looking.

Conclusion:

Selecting the right accountant for your micro-corporation is a strategic decision that can significantly impact your financial success. By asking these key questions and thoroughly vetting potential candidates, you can forge a partnership with an accountant who not only understands the unique challenges of the healthcare industry but also contributes to the long-term financial health of your micro-corporation. Remember, your financial ally should not only manage numbers but empower you to make informed and strategic financial decisions for the success of your practice.

You can check our SimpliMD business professional network here and look at some recommended options for groups that work with doctors specifically.

I also really like TaxElm as a great solution for those of you that are a little more self sufficient because they are really interested in helping to build your small business competency just like SimpliMD.

IncSight has a similar philosophy but is a more full service agency that works with doctors all over the country and offer several pricing options. Check out IncSight here and do a discovery call with Israel Diaz here-he is great!

Tod