How to Choose an Accounting Firm for my Business?

How do you know what accounting firm is right for you?

I will be brutally honest with you: not everyone needs a CPA firm. In my opinion, the best way to pick an accountant is to educate yourself on what the accounting industry offers and how this correlates to your needs and your budget.

Here is what you need to zoom in on when looking for accounting help:

1. Experience, Licensing, and Education: Remember, you're ultimately responsible for signing your tax return and for any deductions claimed—even if someone else prepared your return. That's why the person or firm you hire must have solid knowledge of the US tax . A CPA ( Certified Public Accountant) is the most prestigious license in accounting because of the difficulty of the CPA exam and educational requirements. There are also EAs (Enrolled Agents) and Certified Tax Preparers. EAs pass the rigorous IRS tax exam and must take yearly tax classes. However, EAs are not required to have accounting education, which means some of them may lack understanding of accounting. But do you really need to know all accounting theory to prepare a tax return? In my experience, not always, especially when it comes to individual taxation. Certified Tax Preparers take a simpler exam and are usually suited for straightforward tax individual returns. Keep in mind that not all CPAs specialize in tax; some focus on auditing, financial planning, corporate or government accounting. Experience matters a lot—the more experienced your tax preparer is, the better. In fact, a seasoned EA can often be more knowledgeable in tax than a newly licensed CPA.

   
   

2. Fees: The cost of working with an accounting firm can vary depending on several factors: 1) whether your accountant is a CPA 2) years of experience in the tax field 3) Their overhead expenses (such as rent, tax software, insurance, stuff). Please note: there is no such thing as a good and cheap CPA. CPAs go through rigid schooling and licensing and some has to pick up the tab, right? EAs fees tend to be lower mostly because they did not have to spend five years studying accounting. But please, don't hesitate to compare fees across different firms before committing. Changing accountants is a pain and you want to make sure you can afford your accountant. Keeping a relationship with the person who does your taxes and knows your personal situation is the only way you could get a consistent and relevant tax advice. And in our humble opinion, for many small start ups, hiring a CPA is an overkill. Enrolled Agents, for example, generally do a wonderful job with sole proprietors that file Schedule C on their personal returns.

   
   

   Pro Tip: Usually, accounting firms can give you an accurate quote by looking at your previous tax returns and your financials.

   
   

3. Bookkeeping: Bookkeeping is necessary for tax preparation and tax planning. Income tax is based on net profit, and until you figure out your net profit on your books, it is impossible to utilize any tax-saving strategies or prepare the tax return. Bookkeeping and tax preparation are very much interrelated, and outsourcing both of these activities to the same professional makes a lot of financial sense. However, not all accounting firms offer bookkeeping services, as they may prefer to focus on tax work only.

   
   

4. Integration Between Bookkeeping and Tax Services: Financial records often need adjustments, which can slow down the process if the business owner has to communicate between a separate bookkeeper and a tax preparer. When one accounting firm handles both bookkeeping and tax, the business owner doesn’t need to act as the middleman. Outsourcing bookkeeping to your tax preparer also gives them direct access to your financials, enabling them to start tax planning or preparation without delays. Timely tax work saves on , especially with strict tax deadlines.

   Additionally, having your accounting firm manage your bookkeeping ensures that financial transactions are recorded accurately. When a tax preparer receives financials from an outside bookkeeper, they don’t verify the data—they simply prepare the return based on those numbers. This places all tax responsibility on the business owner, who might be relying on a bookkeeper without tax expertise. When the tax preparer handles bookkeeping, they’re better at categorizing transactions and asking questions because they understand which expenses the IRS will allow.

   
   

   Please note: having your bookkeeping done by a tax preparer (even a tax CPA) doesn’t make your financials “audit-proof.” Responsibility for all deductions still rests with you, the client, but using a tax CPA for bookkeeping adds an extra layer of accuracy and security.

   
   

5. When to Outsource your Bookkeeping: If you have a small side gig that you report on Schedule C, professional bookkeeping can be overkill that drains your funds. You could do most of the calculations yourself in Excel and provide that to your tax person. Or you may want to run your own bookkeeping on such software as QBO for Self employed, which does not ask you to do tedious bank reconciliations. However, when your company's volume grows and/or you become an S-Corp or a partnership that needs proper financials for tax preparation purposes, this is when you realize that time is money, and it makes sense to outsource bookkeeping to specialists. You can read more about accounting, and most importantly, why bank reconciliations are so important here.

   
   

6. Location: Federal tax is complicated. But in addition to the federal tax, there is also state tax. And each of the 50 states has its own quirks and weird rules. The taxpayer risks losing many state tax deductions or, even worse, getting involved in a state tax audit, simply because their tax preparer was not aware of the particular rules of the state where the client resided or generated income. We are located in San Diego and work with California small business clients only. This is because we understand our limitations and the scope of work we are hired for. We refer out-of-state clients to tax practitioners in their "native" states.

   
   

In the accounting industry, we call CPA firms that handle both bookkeeping and tax preparation "full-service accounting firms." In many cases, doing bookkeeping at a CPA firm usually costs extra compared to using an independent bookkeeper, but the money saved through timely tax return planning and preparation, along with the absence of accounting headaches for business owners, often outweighs the additional costs.

And now a shameless plug: we are a CPA firm that provides accounting, tax and payroll services to S Corp business owners that grew out of the initial "side gig" stage and now realize that they can't handle everything themselves. Here are services we offer. We will be happy to help!