Every business owner, whether it is a medical practice or a sub shop, needs to utilize an accountant. When you have a simple personal tax return and just utilize the standard deduction given by the IRS, an accountant is really not necessary. You can just use Turbo-Tax and file your return in a matter of 30-60 minutes. When you have a business though, your tax situation becomes more complicated. This is why it is very, very, VERY important you find a good accountant. No… screw that, you need to find a GREAT accountant. Not a tax professional, a certified public accountant (CPA).
The difference between a mediocre accountant and a great accountant is the difference between a $10,000 tax a bill and a $500 refund. Seriously… It astonishes me how many accountants don’t even understand the tax code and all the legal loopholes and rules that are available for small business owners. I have discussed the importance of a small business and how it impacts your taxes positively HERE. Check it out, read it first before continuing with this article. Seriously, stop reading and go read that post first.
Let me tell you a quick personal story about accountants. When I first started my business, I hired a random CPA I found off Google. I was very excited about all the little advantages a small business had during our initial consultation. He gave me a few pointers and that was essentially it. So, I operated my little Suboxone clinic for 4 months before it was tax time. This was the start up phase of the business and I had a lot of expenses, therefore I was not showing a profit on paper. Great! I gave all my information to this CPA and he filed my taxes. I owed $3,500… Damn it… Oh well, it would have been a lot worse if I had not started that business, so I thought.
The next year I used this same CPA. This time though, I started my medical cannabis clinic and began generating a significant profit. I did not have a real understanding of the tax code, how business expenses worked, and how money was deducted from my tax obligation at the end of the year. All I knew was that you could deduct a lot of expenses if you started a business. So, I was generating around $10,000 a month on the side in July of that year through my medical cannabis clinic and decided I would use those juicy cannabis dollars on starting a men’s health clinic. I started that in September/October thinking it would give me a big deduction. Unfortunately (actually this is a good thing), I started to generate a lot of money from the men’s health practice! January rolled around and I started filing my taxes with this CPA. I owed $7,500… What the hell? I thought I was supposed to be saving money on my taxes with this business! I ended up paying more! I immediately fired this CPA after I paid that tax bill.
I went without a CPA for about 3 months until a business associate pointed me towards his CPA. He told me “this guy has your best interests in hand.” Awesome, that is exactly what I needed. During our initial consultation, this CPA blew my mind with all the legal tax deductions that I was not utilizing in the previous 1-2 years. I literally lost $10,000+ because this other CPA didn’t know what the hell he was doing. So long story short, this new CPA saved me probably $20,000 in taxes this last year and I generated a SIGNIFICANT profit this last year compared to the previous one.
This is why having a GREAT CPA is absolutely CRITICAL to your financial well being. Listen, taxes are the number one expense in your life. You will pay more in taxes than any other expense, look up the numbers. The good news though, is that this is an expense that you can LEGALLY decrease. Congress passes the tax code, and guess what? Every congressman and senator own businesses and real estate. Do you think the tax advantages available to business owners and real estate investors are just coincidental? If so, get your head out of the sand. If they can take advantage of it, SO CAN YOU!
How do you even find a great CPA? Sometimes it takes shopping around for one. I used multiple CPAs before I found my current one. Unfortunately, this cost me a lot of money. Therefore, do not settle on a CPA until you have interviewed at least 4. You need to pick their brain and ask them some important questions:
- Can you tell me all the legal tax deductions I can utilize through my small business?
- Do you have experience with my kind of business/practice?
- What records do I need to keep?
- What are your fees? (A detailed tax return that saves you a lot of money will cost $1,000-$1,500. This is a well spent expense).
- Can you represent me during an IRS audit? (This is important, if he/she is confident in the advice they are giving you, then they also need to be confident enough to stand in front of the IRS for you).
- What is your personal tax philosophy? (Make sure they are assertive and aggressive yet cautious. Mine told me “It is your patriotic duty to lower your taxes!” I hired him on the spot after I sensed his aggressiveness).
- How often should we meet? (Most great CPAs like to see their clients on a quarterly basis to keep a close tab on their revenue, income, and tax obligations. This is important because you can then begin to utilize various strategies throughout the year to help with your tax obligations).
In Sandy Botkin’s (retired IRS tax attorney) book “Lower Your Taxes- BIG TIME!”, he says to hire an aggressive accountant. If they are timid, then find another one. It is better to be aggressive than not. If you get audited, so be it, you will have to pay the taxes they assess if you cannot provide proof this was a business deduction. You aren’t going to go to prison unless you are evading taxes. Your CPA is a licensed professional, just like you! They will not be helping you evade taxes and break the law, just like you wouldn’t purposely divert narcotics or kill a patient. Therefore, feel confident in your CPAs ability if they are truly helping you lower your tax bill.
Too many CPAs are just data entry nerds and really don’t understand the tax code. You need to find a great CPA who understands the tax code or hire a tax attorney that does. That might be going overboard for the nurse practitioner who is just starting a business, so a knowledgeable CPA is sufficient until you begin generating millions in revenue.
Finding a great CPA is not that difficult. It just takes a little time. That extra time you spend finding one will pay for itself 100-fold though. I am not exaggerating when I say that a great CPA will literally save you $20,000 a year in taxes if you have a few small side practices and work part time as The Elite Nurse Practitioner Model advocates for. When you start making some serious money, your tax scenario becomes much more complicated than just a simple W2 salaried tax filing… Therefore, GET OFF YOUR BUTT AND GO FIND A GREAT CPA NOW! You will thank me come next tax season.