A Doctor’s Guide to Selecting and Using a CPA

CPA
  • CPAs can be incredibly useful for doctors with complex financial situations.
  • CPAs can help doctors with tax preparation, financial planning and income tax advice. 
  • When choosing a tax preparer, be sure to verify their credentials, choose someone with experience with doctors’ finances, take note of their service fee structure, and conduct interviews before beginning to work with them.

As a doctor, surrounding yourself with a team of expert advisors is crucial to your success. Certified public accountants are an element of this team that can be incredibly helpful.

A CPA is an accounting professional who has met state licensing requirements through educational requirements, experience and passing scores on the state CPA exam. They work with everything from tax preparation, to financial planning, to income tax advice.

Gone are the days of a CPA simply filling out your return. Now, these tax professionals can ensure your personal or practice finances are in order and give you tax advice to avoid overpaying on your taxes.

Hiring a great, industry-specific expert can help you realize savings and ensure an efficient tax strategy. If you are searching for an experienced advisor, use the following tips to help determine the right person for your tax preparation needs.

Do I need to hire a CPA?

A CPA can be beneficial to anyone, but paying a professional to handle your tax documents may not be worth it financially for some. 

Doctors who receive a single W2, don’t itemize and don’t have additional business interests can potentially handle filing their own taxes by hand or through tax software (if you have time to do that).

However, doctors with more complex financial situations will likely benefit from a CPA. Examples of these doctors include: 

  • 1099 employment
  • Practice owner
  • Investor/owner of S-corporation or Partnership
  • High income earner: You are four times more likely to be audited if you earn over $200k. If your return is marked “self-prepared”, your chances are even higher. 
  • Real estate investor: Passive rental income, sales and like-kind exchanges, and rules of depreciation and capitalization can be complicated.
  • High Net Worth taxpayer: If you have a high amount of or varying types of investments, tax compliance issues are likely to be more complicated.

Selecting a CPA

Once you have determined that you need a CPA, it is time to find a professional that can handle your needs and unique circumstances. 

It is important to perform due diligence to find someone you can trust because you are allowing them access to vital personal data, including Social Security numbers, income, and investment information. This is not information you want to share with an individual or company that has not been thoroughly vetted.

Get referrals

One of the easiest ways to start your search is through referrals. Ask other doctors who they work with and why. The “why” is incredibly important. Understand how the referred professional works and communicates before choosing them blindly. 

Choose a trusted preparer

It is important to be vigilant when assessing the abilities and qualifications of your prospects. There are many who market themselves as “tax experts” but not all are as highly qualified as CPAs. Unlike CPAs, unlicensed individuals do not have the robust knowledge needed to tackle complex issues that may arise.

Confirm that your prospective CPA is affiliated with or licensed by a professional organization that provides continuing education, oversight and holds them to a code of ethics. Check the IRS directory of credentialed PTIN holders to find CPAs, enrolled agents and attorneys near you.

Choose a CPA with experience with clients in your field

Selecting a CPA with experience preparing doctors’ taxes can be a huge benefit, as they understand the complexities of doctors’ financial situations. Additionally, they may be able to assist with tax documents for your practice if you are an owner or partner. 

Consider service fees

The two most common fee structures for CPAs are as follows: 

  • Hourly fees – 57% of CPAs charge on an hourly basis, according to a survey by Intuit. Hourly rates fluctuate based on the accountant’s experience, training and location.
  • Fixed fees – A separate survey found that 50% of financial professionals charge a fixed fee for accounting services. 

Depending on a myriad of factors, CPAs often charge more than other tax advisors or professionals because of their additional education, and therefore, expanded insight into complexities. This solid knowledge base is recommended when hiring a CPA, but use your judgment to make the right decision for your needs.

Avoid those who base fees on a percentage of your refund or promise higher refunds than the competition. Tax scams are common. These fee structures can be indicative of shady processes.

Interview your top choice(s)

Don’t settle with a CPA simply because they are nice or you are in a hurry to find one. Having even a brief phone or video interview can give you greater knowledge and security in the decision you make.

Here are some questions you may want to ask:

  • Will I always be working with only you or a team?
  • Have you ever worked with doctors previously?
  • Can you describe your review process?
  • What is your average turnaround time during tax season?
  • Will you support me if I am audited? Will I pay extra?
  • How do you bill for your services?
  • Will you give me a reliable estimate of cost in advance?
  • What does your firm do besides individual tax preparation? (If you are interested in other services)

What to look out for when using a CPA

As stated before, tax scams are common, and unqualified tax preparers could put you at risk for hefty penalties if your return is audited and errors are found. Watching out for key red flags and determining no mistakes were made on the completed return is essential to preventing these consequences. 

Review the entire tax return before signing

The taxpayer is legally responsible for the accuracy of their tax return regardless of who prepared it. Before signing, verify that everything looks correct on your return and ask questions if you notice possible errors.

Make sure the preparer signs the return and includes their Preparer Tax Identification Number

A paid preparer is required by law to sign the return and include their PTIN. 

Never sign a blank tax return

Consider it a noteworthy red flag if a tax professional asks you to sign a blank return. If your chosen advisor encourages this, we recommend finding a new CPA. 

Before you go…

Taxes can be daunting, but having a great, experienced CPA on your team can take some of that stress off of your plate. 

If you need a good place to start, our Build Your Team program connects you with healthcare-specific experts like CPAs, completely free of charge. Visit our page to get connected with our network of advisors ready to help you achieve your goals! 

Panacea Financial, a division of Primis. Member FDIC.

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