We all know that U.S. tax law is not simple and can be too difficult to figure out on your own. On top of taxes, a small business owner is expected to handle their own bookkeeping and payroll, and dealing with all these issues is very time-consuming, confusing, boring, and stressful. That's where outsourced accounting comes in. Accounting firms work with business owners and take care of all accounting and tax tasks, allowing business owners to focus on running and growing their businesses. Just like shopping for any other service, you first need to figure out exactly what you need and then look for specialists matching your criteria.

Here is a list of requirements you should consider:

1. Experience, Licensing, and Education: Always remember that you are the one who signs off on the return and takes all responsibility for bookkeeping and deductions claimed on the return (even if it's done by someone else). This means the person or firm you hire needs to have years of experience and education in the tax field. CPA (Certified Public Accountant) is the most prestigious license in accounting, but there are also Enrolled Agents and Certified Tax Preparers. These specialists are able to tell you what's deductible and what is not, and how to properly construct your business transactions, among other things. Please note that not all CPAs focus on tax; some specialize in auditing, financial planning, or even government accounting. The more experience your tax preparer has, the better. In many cases, an experienced Enrolled Agent can be much more knowledgeable than a fresh-out-of-school CPA.
2. Fees: The cost of working with an accounting firm can vary depending on several factors: 1) whether your accountant is a CPA (Certified Public Accountant) 2) years of experience. 3) Their overhead. Please note: there is no such thing as a good and cheap CPA. CPAs go through rigid schooling and accumulate years of experience and hands-on knowledge on which you rely. However, it is important to get a clear understanding of the fee structure before agreeing to work together. Don't hesitate to compare fees across different firms. Usually, accounting firms can give you an accurate quote by looking at your previous tax returns and your financials.
3. Bookkeeping: Bookkeeping is necessary for tax preparation and tax planning. Income tax is based on net profit, and until you figure out your net profit on your books, it is impossible to utilize any tax-saving strategies or prepare the tax return. Bookkeeping and tax preparation are very much interrelated, and outsourcing both of these activities to the same professional makes a lot of financial sense. However, not all accounting firms offer bookkeeping services, as they may prefer to focus on tax work only. This is unfortunate, since doing books and taxes at the same place saves the business owner time, energy, and money.
4. Integration Between Bookkeeping and Tax Services: Financials often need adjustments, which slows down the accounting process if the business owner has to relay the message from their tax preparer to their bookkeeper and back. When an accounting firm does both bookkeeping and tax, the business owner does not have to be involved. Also, outsourcing your bookkeeping to your tax preparer allows your tax person direct access to your financials. This means that the tax preparer can start on your tax planning or tax preparation project without delays and can save a lot of money by doing tax work on time, as taxes have strict deadlines. Additionally, by having your accounting firm do your bookkeeping, you can ensure that your financial transactions are recorded correctly. When a tax preparer receives business financials from an outside source, they don't have the diligence to audit these financial statements. They take the numbers and prepare the tax return from them without verifying any information. All tax responsibility lies with the business client, who in turn relied on the advice of a bookkeeper who may not be knowledgeable. However, when a tax preparer handles bookkeeping, they do better at categorizing transactions and asking questions. This is because they know what expenses will be accepted and which ones will not by the IRS. Please note: having your bookkeeping done by a tax preparer (even a tax CPA) does not mean your financials are "audit" proof. The responsibility for all deductions still lies with the client, but having bookkeeping done by a tax CPA gives you another layer of security.
5. When to Outsource your Bookkeeping: If you have a small side gig that you report on Schedule C, professional bookkeeping can be overkill that drains your funds. You could do most of the calculations yourself in Excel and provide that to your tax person. However, when your company grows and you have numerous transactions, complex deals, and investments, this is when you realize that time is money, and it makes sense to outsource bookkeeping to specialized individuals.

In the accounting industry, we call CPA firms that handle both bookkeeping and tax preparation "full-service accounting firms." In many cases, doing bookkeeping at a CPA firm costs extra compared to using an independent bookkeeper, but the money saved through timely tax return planning and preparation, along with the absence of accounting headaches for business owners, often outweighs the additional costs.

These are some points to consider when looking for an accounting firm. It's important to find someone who not only has the necessary knowledge and experience but also offers personalized service and is accessible when you need them. Additionally, their expertise in your specific industry and their ability to represent you in front of the IRS or FTB can be valuable assets. Remember to also consider their licensing and years of experience when making your decision.