Questions to ask your CPA
Before Hiring
1. Have an idea of what services you are looking to have done before going in (tax returns, payroll,
bookkeeping, financial statement preparation, auditing, financial/tax planning, estate planning,
etc.)
2. Does the firm have any other clients in my industry?
3. What does your average business client look like? Does my company fit?
4. Who will be performing the services and what will their rate(s) be?
5. What (estimated) % of the total work will be performed by lower paid staff vs higher paid
owner/partners?
6. What are the qualifications of the staff that will be working on my business? Do they know my
financial software?
7. For the services we are looking for what estimated fees can we expect annually?
8. What kind of itemized billing can we expect? How often will we be billed?
9. What % of your tax returns get extended? What is the likelihood that mine will be completed
without an extension?
10. What kind of experience do you or your firm have with businesses structured like mine (C Corp,
S Corp, LLC, Partnership, etc.)?
11. What other services does your firm offer (financial planning, new entity formation/registration,
trust services, valuations, retirement plan formation/reporting, etc.)? What are the
qualifications of the individuals performing those services?
12. How do you handle when/if your clients get audited? What is your experience level in dealing
with IRS/State/Sales Tax audits?
What to expect from your CPA
Annually
1. Tax planning meeting sometime in late Oct or Nov (or a couple of months before your year-end)
to:
a. Plan for year-end activity (equipment purchases, make or defer expenses)
b. Determine income levels and tax consequence
c. Evaluate wages paid to owner for adequacy
d. Impact of corporate income on personal income tax
e. Ensure estimated payments are adequate
f. Update you on changes coming for new year (change in payroll rates, depreciation rules,
health insurance impact, etc.)
2. Submit year-end information as soon as possible and ask for corporate tax return to be done on
time without extension. Generally speaking it is your responsibility to submit accurate numbers
and schedules to the CPA. If you know the information is not accurate or is outdated and are
not sure how to clean it up ask the CPA for assistance but let them know if any of the balances
you are submitting are not correct or questionable. Give them any documentation to support
your position.
3. Trial Balance and Journal entries should be sent back to you along with the tax return (with
detailed filing and payment instructions) so that your books can be tied out to their books and
the tax return.
a. If the CPA makes the entries then they should be double checking to see that the
balances match the tax return and trial balance and they should show this to you and
explain the entries that were made. Question them if they don’t make sense to you.
b. If you make the entries then be sure that the end result matches the tax return and trial
balance. Ask about any entries that don’t make sense. There are occasions where
making the suggested entries do not have the desired effect. I have had to question
some of the entries made in the past and yes errors do occur.
c. If there are amounts on the trial balance that you are not familiar with or question, ask
the CPA to provide you with documentation that you can keep for your records.
4. Updated Asset List and a future depreciation schedule for the new (current) year to be used to
base monthly depreciation entry on.
5. List of monthly journal entries for accruals and prepaid accounts with new calculated amounts.
Billing
1. Ask that all bills be itemized to show what was worked on and by who and what their billing rate
was.
2. Be sure that activity is billed to the correct entity if you have multiple companies.
Monthly/Quarterly Compiled Statements
1. Be sure to get the information to your CPA as soon as possible after the end of the
month/quarter. Financial statements should be received back at least before the following
month end but the sooner the better. If you are using them for decision making ask for them by
the 15th, no later than the 20th if possible.
2. You should be getting journal entries and a trial balance so that you can make the entries and
match your numbers to the CPA’s. Compare after making the entries to be sure they match.
Sales or Payroll Tax Preparation
1. Submit information as soon as possible after month/quarter end. Keep copies.
2. You should get copies of the returns back prior to the return due date.
3. Along with the returns you should get detailed instructions as how much payment is owed, who
is it owed to, where to send payment, when is it due, etc.
4. If you are not sure what entries to be made in your financial system, ask that detailed entry
information be provided as well.
Questions to ask a Payroll Preparer
1. Consider whether you will be responsible for remitting taxes withheld or if you would prefer the
payroll preparer to assume responsibility for that.
2. Which items will the preparer assume responsibility for remitting and which remittances will
have to be done by you?
3. If you choose to have the preparer remit payroll taxes what legal responsibility to they assume
and what liability stays with you the employer?
4. What is the billing structure? What is the billing rate? What is it based on? Ask about any
amounts you will be billed for that may be disguised as payroll taxes (I have seen employers be
billed for full FICA amounts when the calculated FICA amount was actually less due to Sec 125
healthcare wage reductions—rather than calling this a payroll service charge the billing listed it
as payroll taxes. I have also seen employers be “billed” for the unemployment rate calculated
on every employee throughout the year and the amounts were not ceased once the employee
met the earnings threshold.)
5. What will my bill look like? Do not accept any bills that simply list a single amount that will be
posted to your account. Ask for an itemized bill that details all wages paid, taxes withheld,
charged and remitted and other amounts withheld and remitted. If you get a bill and don’t
understand what you are being charged for ask. Ask an outside opinion if you don’t get an
answer that you understand.
6. How many clients to they do payroll for and how many employees on average do the clients
have?
7. How long has the payroll processor been in business? Been processing payroll?
8. Are they bonded (if an individual)?
9. What type of reports will you receive each pay period? How will they be received?
10. What evidence will you receive of payroll tax remittances?
11. Do they provide any services with respect to HR compliance (posters, paperwork upon
hire/termination, etc.)? What are the additional charges for those services?
12. What are the options for reporting payroll (phone in, online)?
13. Do they offer the option of generating/downloading a journal entry or other means of recording
payroll in your financial system?