Working with an Accountant: What to Expect and What to Demand

Your Accountant Is Not Just a Tax Filer

Too many business owners treat their accountant like a vending machine. They dump a box of receipts in February, get a tax return in April, and ignore them the rest of the year. That is a waste of money and a missed opportunity.

A good accountant is a strategic advisor. They should be helping you save on taxes, structure your business properly, plan for growth, and avoid expensive mistakes. If they are not doing that, you are either not asking or you have the wrong accountant.

The right CPA relationship is worth $5,000 to $20,000 or more per year in tax savings, avoided penalties, and better financial decisions. The wrong one costs you the same amount through missed deductions, reactive-only service, and generic advice.

Types of Accounting Professionals

Bookkeeper

Handles day-to-day transaction recording, bank reconciliation, and basic reporting. Does not prepare tax returns or provide strategic advice. This is your data entry person.

Cost: $300 to $1,500/month depending on transaction volume.

Certified Public Accountant (CPA)

Licensed professional who can prepare tax returns, perform audits, and provide advisory services. A CPA has passed a rigorous exam and meets continuing education requirements.

Cost: $1,000 to $5,000+ per year for a small business, depending on complexity.

Enrolled Agent (EA)

Federally licensed tax professional. Can represent you before the IRS. Specialists in tax preparation and planning but generally do not perform audits.

Cost: Similar to CPAs for tax work, often slightly less.

Tax Preparer

Prepares tax returns but may not be licensed (CPAs and EAs are). Be cautious with unlicensed preparers for anything beyond simple returns.

CFO Services (Fractional or Virtual)

For businesses in the $500,000 to $5 million range, a fractional CFO provides higher-level financial strategy: cash flow forecasting, financial modeling, growth planning, and KPI dashboards. They work 5 to 20 hours per month at $150 to $300 per hour, giving you executive-level financial guidance without the $150,000+ salary of a full-time CFO.

Choosing the Right Level of Service

Business Stage	Revenue	What You Need	Typical Annual Cost
Solo freelancer	Under $75K	DIY bookkeeping + EA or CPA for taxes	$500 - $1,500
Small operation, no employees	$75K - $250K	Part-time bookkeeper + CPA	$3,000 - $6,000
Growing business with employees	$250K - $1M	Bookkeeper + CPA + occasional advisory	$6,000 - $15,000
Established business	$1M - $5M	Bookkeeper + CPA + fractional CFO	$15,000 - $40,000
Scaling company	$5M+	Full accounting team or outsourced accounting firm	$40,000+

What You Should Expect From Your Accountant

At Minimum (Tax Compliance)

• Accurate and timely tax return preparation
• Quarterly estimated tax calculations
• Year-end tax planning meeting
• Answers to your tax questions throughout the year
• Keeping you compliant with filing deadlines

What You Should Demand (Advisory)

• Proactive tax planning. They should be calling you in October or November to discuss year-end strategies, not waiting for you to ask.
• Entity structure advice. Should you be an S-Corp? When does it make sense to convert? They should tell you.
• Financial statement review. At least annually, they should review your financials and point out concerns.
• Retirement planning input. SEP IRA, Solo 401(k), SIMPLE IRA — which retirement plan maximizes your tax benefit?
• Responsiveness. If you email a question on Tuesday and do not hear back for two weeks, that is a problem.

Tax Savings a Good Accountant Should Identify

Here are specific strategies a proactive accountant should bring to you — not strategies you should have to ask about:

Strategy	Potential Annual Savings	Applies To
S-Corp election (when appropriate)	$5,000 - $20,000 in SE tax savings	LLCs earning $80K+ in net income
Section 179 equipment deduction	Full cost deduction in year 1 (up to $1,220,000 in 2024)	Any business buying equipment
Home office deduction	$2,000 - $5,000	Business owners working from home
Retirement plan setup (SEP IRA or Solo 401k)	$5,000 - $15,000+ in tax deferrals	Self-employed owners
Accountable plan for employee expenses	Varies	S-Corp owners with personal expenses
August cost segregation studies	$10,000 - $50,000+	Commercial property owners
Reasonable salary optimization (S-Corp)	$3,000 - $15,000	S-Corp owners
Meals deduction (50% - 100% depending on type)	$1,000 - $5,000	All businesses with business meals
Vehicle deduction optimization (standard vs actual)	$2,000 - $8,000	Businesses using vehicles

If your accountant has never mentioned at least half of these, they are leaving money on the table.

What to Look For When Hiring

Industry Experience

An accountant who works with contractors is going to give you dramatically better advice than a generalist. They know percentage-of-completion accounting, job costing, retention, and industry-specific deductions. Ask how many clients they have in your industry.

Proactive Communication

During the interview, ask: "What does your year-round service look like? When will I hear from you outside of tax season?" If the answer is vague, keep looking.

Technology Compatibility

They should work with modern cloud accounting software (QuickBooks Online, Xero). If they still want you to mail paper documents, that is a red flag.

Clear Pricing

Get a fee structure in writing. Hourly? Fixed annual fee? Per return? Avoid surprises.

References

Ask for references from businesses similar to yours. Call them and ask: "Does your accountant proactively save you money, or do they just file paperwork?"

Interview Questions to Ask a Prospective Accountant

Use these questions to separate proactive advisors from form-fillers:

1. "How many clients do you have in my industry?" (You want at least 10 to 15)
2. "What does your year-round service look like? Walk me through a typical client relationship month by month."
3. "When do you typically reach out for year-end tax planning?"
4. "What is your turnaround time on questions emailed between meetings?"
5. "At my revenue level, what entity structure would you recommend and why?"
6. "What was a specific recommendation you made to a client this year that saved them significant money?"
7. "How do you handle it when a client gets an IRS notice?"
8. "Do you charge for quick phone calls or emails, or is that included?"
9. "What accounting software do you work with?"
10. "What is your fee structure? Can I get a written engagement letter?"

A good accountant will answer these confidently and specifically. A mediocre one will give vague responses or seem uncomfortable with the questions.

The S-Corp Decision: When Your Accountant Should Bring This Up

One of the most impactful tax strategy conversations your accountant should initiate is whether to elect S-Corp status. Here is the basic math:

As a Sole Proprietor/LLC (no S-Corp election):

• Net income: $120,000
• Self-employment tax (15.3% on first $168,600): $18,360
• Total SE tax: $18,360

As an S-Corp with reasonable salary of $70,000:

• Salary: $70,000 (subject to payroll tax of 15.3%): $10,710
• Pass-through income: $50,000 (NOT subject to SE tax): $0
• Total payroll tax: $10,710
• Annual savings: $7,650

The savings come because S-Corp pass-through income is not subject to self-employment tax. The IRS requires you to pay yourself a "reasonable salary," but any profit above that salary avoids the 15.3% SE tax.

The break-even point where S-Corp election typically makes sense: when your net income consistently exceeds $60,000 to $80,000 per year. Below that, the additional payroll costs and filing complexity may outweigh the savings.

A good accountant runs this analysis for you proactively. A mediocre one waits for you to ask.

How to Maximize the Relationship

Keep Clean Books

The less cleanup your accountant has to do, the less they charge and the more time they have for strategic advice. Use bookkeeping software, categorize expenses properly, and reconcile monthly.

Ask Questions

Your accountant works for you. If you do not understand something on your tax return, ask. If you are considering a large purchase, ask about tax implications first. If you are thinking about hiring, ask about payroll tax impact.

Schedule Quarterly Check-Ins

Do not wait for tax season. A 30-minute quarterly call to review financials, discuss tax strategy, and plan for the next quarter is incredibly valuable.

The Quarterly Meeting Agenda

Quarter	Meeting Focus	Key Topics
Q1 (January-March)	Tax filing prep	Prior year review, identify missing documents, discuss refund or balance due
Q2 (April-June)	Mid-year check-in	Q1 estimated tax assessment, review YTD financials, any entity changes
Q3 (July-September)	Strategy session	Mid-year P&L review, retirement contribution planning, hiring decisions
Q4 (October-December)	Year-end tax planning	Maximize deductions, accelerate/defer income, equipment purchases, retirement contributions

The Q4 meeting is the most valuable. By October, your accountant has enough data to project your full-year income and recommend specific actions to minimize taxes.

Share Your Goals

Your accountant cannot advise you on growth strategy if they do not know your goals. Tell them where you want to be in one, three, and five years. That context changes their advice.

Bring Organized Information

When you meet, come prepared:

• Updated P&L and balance sheet
• Questions written down
• Information about major transactions or changes
• Plans for the upcoming quarter

Red Flags

• They never contact you proactively. A good accountant reaches out, especially in Q4 for tax planning.
• They miss deadlines. Inexcusable.
• They cannot explain your return in plain language. If they hide behind jargon, they either do not understand it themselves or do not respect your time.
• They charge for every five-minute question. Some billing is expected, but nickel-and-diming kills the relationship.
• They discourage questions. You are paying for their expertise. If they make you feel stupid for asking, find someone else.
• They are not keeping up with tax law changes. Tax code changes regularly. Your accountant needs to be current.
• They file extensions every year. One extension due to unusual circumstances is acceptable. Filing extensions every year suggests they are overloaded or disorganized.
• They have never suggested you change anything. If your accountant has never recommended an entity change, a retirement plan, a deduction you were missing, or a financial improvement, they are not looking at your situation critically.
• They are unreachable from January to April. Tax season is busy for everyone, but a 6-week blackout on communication is unacceptable.

When to Switch Accountants

If you recognize three or more of the red flags above, it is time to switch. Here is how to do it cleanly:

1. Find the new accountant first. Do not leave yourself without coverage during a transition.
2. Notify your current accountant in writing. A professional email is sufficient.
3. Request copies of all documents. Prior tax returns (last 3 years minimum), QuickBooks backup files, entity documents, depreciation schedules.
4. Ensure all filings are current. Confirm there are no outstanding returns or payments before transitioning.
5. Provide your new accountant with a summary. Business structure, current issues, and what you need from the relationship going forward.

The best time to switch is right after tax season (May or June), giving your new accountant a full year before the next filing deadline.

Retirement Plans Your Accountant Should Discuss

One of the most overlooked tax-saving strategies for business owners is retirement plan optimization. Your accountant should be proactively recommending the right plan:

Plan Type	Max Contribution (2024)	Best For	Key Benefit
SEP IRA	Up to 25% of net SE income (max $69,000)	Solo owners, simple setup	Easy to set up, high contribution limits, flexible year to year
Solo 401(k)	$23,000 employee + 25% employer (max $69,000 combined)	Solo owners with high income	Highest contribution potential, Roth option available
SIMPLE IRA	$16,000 employee + 3% match	Businesses with under 100 employees	Simple for both employer and employee, lower admin cost
Traditional 401(k)	$23,000 employee + employer match	Businesses with employees wanting to attract talent	Best employee recruitment tool, employer match flexibility

Example: A sole proprietor earning $150,000 in net income could contribute $37,500 to a SEP IRA (25% of net income). At a 30% combined tax rate, that saves $11,250 in taxes this year while building retirement wealth.

If your accountant has never brought up retirement plan options, you are likely overpaying taxes by thousands of dollars annually.

What Your Accountant Needs From You

The relationship goes both ways. Here is what a good accountant needs from you to do their best work:

Monthly

• Reconciled books (or access to your accounting software)
• Notification of any unusual or large transactions
• Updated receivables and payables aging

Quarterly

• Year-to-date P&L and balance sheet
• Questions collected over the past quarter
• Updates on business changes (new employees, new service lines, major purchases)

Annually (Before Year-End)

• Projected full-year revenue and profit
• List of planned major purchases or investments
• Contractor payment totals (for 1099 preparation)
• Any changes in personal circumstances that affect taxes (marriage, home purchase, additional income)

At Tax Time

• Final P&L and balance sheet
• W-2s and 1099s received
• Business mileage log
• Home office measurements (if applicable)
• Prior year tax return (if switching accountants)
• List of estimated tax payments made during the year

The more organized and timely your information, the less your accountant charges for prep time and the more time they have for strategic advice.

Bookkeeper + CPA: The Right Structure

For most small businesses, the ideal setup is:

1. A bookkeeper handles day-to-day transaction entry, reconciliation, and basic reporting. They keep your books clean throughout the year.
2. A CPA handles tax preparation, tax planning, strategic advice, and year-end review. They work with the clean books your bookkeeper maintains.

This division of labor is cost-effective. You are not paying CPA rates for data entry, and you are not expecting a bookkeeper to provide tax strategy.

The Cost of Dirty Books

When your books are a mess, here is what happens at tax time:

Situation	Extra Cost
Uncategorized transactions (100+)	$500 - $1,500 in cleanup
Bank accounts not reconciled	$300 - $800 per account
Mixed personal and business transactions	$500 - $2,000 to sort
Missing receipts for deductions over $75	Lost deductions ($1,000+ in tax savings)
No mileage log	Lost vehicle deduction ($3,000 - $10,000 in deductions)
1099s not tracked	Potential IRS penalties ($290 per missing form)

A bookkeeper at $400 per month ($4,800 per year) typically saves you $2,000 to $5,000 in accountant cleanup fees plus thousands more in deductions you would otherwise miss. It is one of the best investments a growing business can make.

The Bottom Line

Your accountant should make you money, not just cost you money. The right accountant pays for themselves many times over through tax savings, strategic advice, and problems avoided. Invest in the relationship, demand proactive service, and never settle for someone who just fills out forms.