CPA Questions to Ask
For freelancers, small business owners and anyone hiring an accountant for the first time. Questions on fees and who actually does the work, quarterly estimated payments, business structure, which expenses are defensible and how to document them, retirement plans, remote work across state lines, record retention, and correcting an earlier return.
The questions
Open any question for the note
How do you charge: hourly, a flat fee per return, or a monthly retainer, and what does that include?
Why ask it
Fee structure shapes behaviour. Hourly billing makes clients hesitate to send the quick question, which is usually the one worth asking. Ask what a client with your setup paid last year in total, not the starting price for a simple return.
Who will actually be doing my work, and who do I email in July?
Why ask it
Plenty of firms have a partner win the engagement and a junior prepare the return. That works when review is real, but you want the name of the person who replies outside filing season, not only the one who signs in April.
How fast do you reply during filing season, and do you bill for a phone call?
Why ask it
Two days and two weeks are both workable turnarounds. Finding out which one you bought after a notice arrives with a deadline on it is the problem. Ask what happens in the last fortnight before the deadline, when they are busiest.
Have you worked with businesses like mine, and how many do you have now?
Why ask it
Familiarity shows up in the questions they ask you. Someone who knows your industry raises inventory, contractor payments or sales in other states without being prompted. General reassurance that they handle all sorts is worth less than one concrete example.
What do you need from me, in what format, and by when?
Why ask it
This sets your own workload. A firm with a secure portal and a fixed checklist costs you fewer hours than one that wants documents emailed as they turn up, and missing their internal cutoff is how clients end up filing an extension.
Do you do bookkeeping too, or do you want the books already reconciled?
Why ask it
The most common misunderstanding in this relationship. Many practices quote a return price assuming clean books, then bill cleanup separately at a higher rate. Ask what state your ledger has to be in to avoid that charge.
Should I be making quarterly estimated payments, and what would you set them at?
Why ask it
Whether you owe them depends on how much of your tax is not being withheld, and a penalty can apply even if you pay the full amount in April. A useful answer gives a figure per quarter and the safe harbor amount that protects you if income rises mid-year.
Is my business structure still the right one, and what would changing it cost me?
Why ask it
Sole proprietorship, LLC and S corporation carry different payroll duties, filing costs and self-employment tax. An adviser worth the fee will name the income level at which a change pays for its own extra compliance, rather than recommending it by default.
If I elect S corporation treatment, what salary would you consider defensible for the work I do?
Why ask it
Reasonable compensation is the part of an S corporation most likely to be challenged, and the defensible figure depends on what hiring someone to do your job would cost. If nobody will name a range or point to comparable pay data, treat the whole plan carefully.
Which of my expenses are you comfortable deducting, and which would you leave off?
Why ask it
The word doing the work is comfortable. Every preparer has a private line between aggressive and defensible, and you want to see where theirs sits before you depend on it. Anyone who says it is all deductible is not protecting you.
What does my paperwork need to look like for the deductions I'm claiming?
Why ask it
Standards are stricter than most people assume: mileage logged at the time rather than reconstructed, the business purpose and attendees for a meal, measured square footage for a home office. A deduction with nothing behind it tends not to survive examination.
Do I qualify for the home office deduction, and does the way I use that room actually meet the test?
Why ask it
Regular and exclusive business use is where these claims fail, and a spare room that is also the guest bedroom often does not qualify. Ask how they would calculate the figure and what records they want you keeping through the year.
What retirement plan makes sense at my income: a SEP, a solo 401(k), or something else?
Why ask it
Contribution room and administration differ sharply between plan types, and a solo 401(k) often allows a larger contribution at moderate self-employment income while a SEP is simpler to run. Having employees changes the answer entirely, so say so upfront.
Which credits am I likely eligible for that I'm not claiming?
Why ask it
A credit is worth more than a deduction of the same size, and eligibility usually turns on facts your preparer cannot see: tuition paid, dependent care, work done on the house, product development. Volunteer the details rather than waiting to be asked.
I work remotely for a company in another state. Where do I owe tax, and do I file in both?
Why ask it
A filing duty can arise where you sit, and a few states tax on the employer's location instead, so income can be claimed twice before any credit is applied. Left alone, this quietly accumulates until one state's revenue department notices.
What should I do differently between now and December to change this year's bill?
Why ask it
Very little can be altered once the year closes, which is why this conversation belongs in autumn. Answers worth having are specific: hold an invoice until January, buy the equipment now, increase plan contributions, realise a loss.
Which records do I need to keep, and how long before I can shred them?
Why ask it
Retention follows how long a year stays open to examination, generally three years and longer where income was significantly understated, with property and basis records kept well past a sale. An instruction to keep everything forever means nobody has thought it through.
If the IRS writes to me, do you handle it, and is that billed separately?
Why ask it
Representation is not automatically part of preparation, and not every paid preparer is able to represent clients before the IRS. Settle now whether answering a notice sits inside your fee, on the clock, or with someone else.
I think an earlier return was wrong. Do we amend it, and what's my exposure?
Why ask it
Amending is a normal step, and correcting an error yourself usually costs less than having it found. What you need is the size of the exposure, whether interest and penalties attach, and whether that year is still open at all.
Is there anything on my return you'd have trouble defending if it were examined?
Why ask it
Ask this last and listen carefully. A preparer who names one or two soft spots and explains how they would support them is doing the job properly. One who says the whole thing is bulletproof either has not read your file or is not telling you.
Working with an accountant
Practical guidance for the conversation itself
Before the first meeting
- Send last year's return in advance. Most of what an accountant needs to assess your situation is in it, and the conversation starts several steps further along.
- Have your numbers to hand: rough revenue, rough profit, how you are paid, whether anyone works for you, and which states you have operated in.
- Write down the two or three decisions you are actually facing this year, such as buying a vehicle, hiring, or taking money out of the business. Planning questions are worth more than filing questions.
- Check the licence. State boards of accountancy publish CPA licence lookups, and enrolled agents are listed by the IRS. Anyone paid to prepare a federal return must have a preparer tax identification number and sign it.
Titles are not interchangeable
- A CPA is state-licensed, can audit and attest, and is often the right choice where financial statements or a complex entity structure are involved.
- An enrolled agent is licensed federally, specialises in tax, and can represent you before the IRS. Frequently cheaper for a straightforward return.
- "Tax preparer" with no credential can still file for you, but has limited ability to represent you if something goes wrong.
- A bookkeeper maintains the ledger and is a different service from tax advice. Many small businesses need both, and paying a CPA rate for bookkeeping is a common waste.
Signs to walk away
- A fee quoted as a percentage of your refund, or a promise of a specific refund before seeing your records.
- Refusal to sign the return as preparer, or asking you to sign a blank or unfinished return.
- A refund directed to their account rather than yours.
- Deductions invented for you, or encouragement to describe personal spending as business spending. The signature on the return is yours and the liability follows it.
Getting value across the year
- Ask before you act, not after. Most tax planning options close the moment a transaction happens, and almost all of them close on December 31.
- Book a short call in the autumn specifically for planning. Filing season is the worst time to get anyone's attention.
- Keep a running note of questions during the year rather than saving them for April, and send them in one message so a flat-fee firm is not billing per interruption.
- Tell them about life changes early: marriage, divorce, a new child, a house, an inheritance, moving state. Each changes the return, and several have deadlines attached.