How to hire an accountant for your freelance business
Stressing out about how to hire an accountant to prepare your income tax return? You’re not alone. When I started freelancing, finding an accountant was one of my biggest challenges, so I wanted to share my own experience in hiring one.
I’ll begin with some preliminary questions that stumped me when I started freelancing.
1. Should I hire an accountant at all?
You’re certainly not required to hire an accountant to prepare your income tax returns. Some freelancers prefer to do their own taxes, often using tax preparation software such as TurboTax or going to tax preparation chains such as H&R Block.
Personally, I’m not comfortable doing my own taxes or using a service that churns out tax returns for all sorts of people without considering my particular needs as a freelancer.
As an employee, you likely have one W2 form to deal with. When you’re self-employed, however, you likely have multiple 1099s (the forms for independent contractors), tons of receipts for business expenses, and a Schedule C (the form where you record business profit or loss). Because of that added complication, I like working with an accountant who knows what kind of business expenses I can legally deduct, can estimate my quarterly tax payments, and can help me improve my freelance business finances.
2. What’s the difference between an accountant and a CPA?
In short, a CPA is an accountant, but an accountant is not necessarily a CPA. CPA stands for Certified Public Accountant, meaning they have met specific education and experience requirements, have passed the CPA exam, and are licensed by one of 50 U.S. states.
A person does not have to be a CPA or even an accountant to prepare your income taxes. Technically, anyone can do it, but I recommend working with a credentialed professional for extra peace of mind.
There is also something known as an Enrolled Agent, which is the highest credential awarded by the IRS. Enrolled Agents are tax professionals who have passed a test on individual and business tax returns and are qualified to prepare income tax returns and represent you before the IRS.
3. Where can I find an accountant to help me with my freelance taxes?
The best way to find an accountant is to ask for referrals from freelancers you know. There’s nothing quite as trustworthy as a personal recommendation. You can start your search locally if you prefer to meet your accountant in person. However, if you’re a remote freelancer or digital nomad, you likely don’t want to have to meet someone in person if you’re gone a lot. There are plenty of accountants who prepare income tax returns remotely.
You could also try these resources:
- IRS directory of tax preparers
- Xero directory of accountants and bookkeepers
- FreshBooks directory of accountants and bookkeepers
- Quickbooks directory of accountants
I found my first accountant via a Google search; my second accountant I found in my local area; and my third accountant I found via a personal recommendation, and I’ve been working with him ever since. Of the three, I’ve met only one in person!
Now let’s move on to the process of vetting and hiring your first accountant.
4. Questions to ask before hiring an accountant for your freelance business
Before you hire an accountant, be sure to get on the phone with them and make sure they’re compatible with your freelance business. I learned to ask these questions through lots of trial and error. Here’s what I’d recommend asking:
- Do you have experience working with freelancers? Freelancers are a special breed. We often have income from many different sources and tend to have unusual business expenses, so your accountant will need to know how to properly categorize these things and know what can legally be defined as a business expense. Make sure your accountant specifically works with sole proprietors (what most freelancers are) or LLCs (if you have decided to become an LLC).
- Do you do things in paper form, electronically, or a mixture of both? If you work remotely, chances are you’ll like doing things electronically. It’s a good idea to see how comfortable your accountant is with digital communication and electronic filing, or if they prefer in-person communication and paper filing.
- How do you protect my information? Make sure your accountant uses a secure connection, such as a secure site that you have a unique login for, and not email to send important documents. Things sent via email are not secure. If you are dealing with paper, make sure you find out what your accountant does with your 1099 forms and tax return copies, which have your social security number or Employee Identification Number (EIN) on them.
- What accounting software do you use? It’s helpful if they use the same software that you use (examples are Quickbooks, Xero, and FreshBooks), so they can easily log into your account and pull reports as needed. If they don’t use the same software, it’s usually not a big deal but just ask.
- Will you be preparing my tax return, or will someone else be handling it? Some accountants outsource their work to tax preparers they hire or contract with. I like to know exactly who I’ll be dealing with, and I prefer to deal directly with a CPA, not get handed off to someone else.
- What are your rates? An accountant should be able to tell you how much they charge for income tax preparation and any other services you may need. I usually pay around $250 to have my income taxes prepared by a professional, and I prefer flat fees. Some accountants will bill you hourly. Just be sure to know how they charge before you begin working with them.
- What’s your process for onboarding a new client and preparing their income tax return? If you’re new at working with an accountant, it can be really confusing. Some accountants will give you a checklist of documents you need to turn into them, and they’ll take it from there. It’s really helpful to have an accountant walk you through what kind of information and documents you need to hand over to them.
5. How to check an accountant’s credentials
Your accountant will be dealing with a lot of your personal information, so it’s wise to check their credentials before you begin work.
- Every accountant using the CPA title is required to keep their license up to date. You can look up a CPA’s name online through your state’s accountancy board to make sure their license is still active.
- Look them up on the Better Business Bureau.
- Look them up on this tool on the IRS website.
- Ask the accountant if they can provide client references, so you can ask their clients about what it’s like to work with them. I’ve done this before; the accountant didn’t mind at all, and it was a huge help.
6. Other tips for freelancers looking for an accountant
- Don’t wait till last minute! Accountants get slammed with last-minute tax prep requests in March and April, so the earlier you can get your taxes done, the better. If you wait till last minute like everyone else, you’ll find that your accountant is difficult to reach, not at the top of their game, or fully booked out and unable to help you. Book an appointment with your accountant early on, in January or February.
- Ask your accountant to create your estimated tax vouchers (Form 1040-ES). While they’re prepping your income tax return, ask your accountant to also create your estimated tax vouchers, also known as Form 1040-ES. This will help you know how much to pay in estimated tax each quarter to avoid penalties. If your freelance income changes drastically later in the year, ask your accountant to help you adjust your payments.
- Accountants can do more than just tax returns. If you’re interested, find out if your accountant offers other services. Some only do tax returns (what they’re most known for), but others do bookkeeping throughout the year for businesses and some even do business advising or coaching.
Taxes are stressful for everyone, so I hope sharing my own experience as a freelancer looking for an accountant took some stress off of you. It took three years of bouncing around to different accountants before I finally nailed down a process for finding one compatible with my business.
As a reminder, I’m a freelance writer, not an accountant, so this article should not replace the advice of a qualified tax professional who can counsel you based on your unique needs.
Have any other tips to share with freelancers looking to hire an accountant? Tell us in the comments below!
- 8 ways to grow your freelance business for the holidays
- How to move from an employee to entrepreneur mindset
- Minimalism for freelancers: letting go to live a life you love
- How to take a vacation as a freelancer (without taking a hit to your bank account!)
- Why over 35s are choosing to freelance
- 8 freelancers reveal how they got their first client
- Why you’re not winning any freelance clients or jobs
- The top 10 books for freelancers
- How to hire an accountant for your freelance business
- How to hire a virtual assistant for your freelance business