Five Mistakes Small Businesses Make When They Hire a CPA

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Hiring the Right CPA

If you are a small business owner and you have never hired a CPA before to run any aspect of your business, you probably don’t even know where to begin. Like many small business owners, you are probably very stressed from running your business and have found yourself searching through a limitless number of websites in order to determine what qualifications your CPA should have. While it can be a difficult situation, it doesn’t have to be as long as you learn how to avoid the critical mistakes so many small businesses make.

Here are 5 common mistakes small businesses make which you should go to lengths to avoid when you hire your next CPA.

Focusing On Things That Don’t Matter

While you do want to hire a CPA who knows how to crunch numbers, you don’t want to only focus on numbers. When hiring a CPA, number crunching should actually be among your least important concerns; it is most important that your CPA understand your business and how to take it to the next level.

Hiring Without Knowing What You Need

You can’t hire a CPA without first knowing why you want to hire them. Before you hire your first CPA, make sure you determine not only what you need but how your CPA can help you achieve whatever it is you’re trying to accomplish.

Hiring a CPA Who Doesn’t Work Well With You

As with hiring for most individuals in your company, you want to make sure you hire a CPA who works well with you. You should insist that your prospective CPA complete a personality test which helps you identify the strengths and weaknesses your new CPA has. In turn, this will help determine how this person will fit in with your company. This could potentially save you and your team from dealing with bad business interactions later in the future.

Hiring an Unqualified CPA

Just because a CPA has his or her certification doesn’t mean they are qualified to do the job. There are lots of CPAs who are just good at test taking. Make sure during the interview phase that your new accountant has an understanding of the job you have hired them to do.

Trusting DIY Accountants

Many accountants are self-taught, and while that has saved many accountants thousands of dollars in tuition fees, sometimes DIY accountants can cause headaches for business owners when they are hired to do a job that’s well over their heads.

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Why a CPA Should Always Be Your First Hire

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Hiring Employees

Hiring employees can be super exciting, especially for a new business owner. Being able to hire extra help not only shows that your business is growing; it also shows that your business is in a position to provide extra income to someone else’s life.

Most employers engage in lengthy discussions about the order in which positions should be filled. Some employers automatically assume an operations manager is the first hire you should make; in point of fact, a CPA is actually the first person you should hire, and if financial resources permit, hire a CPA as soon as you can.

Hiring a CPA as your first hire will not only benefit you as the owner but will also benefit future employees by making sure that your company is in strong financial condition. This will enable you to pay your employees a competitive market wage and improve retention.

Additionally, hiring a CPA can help you flesh through inventory data or any data that your company relies on in order to be able to sustain itself. Most people think of CPAs as only being able to handle finances, when in fact, CPAs have the capabilities to analyze most types of numerical data that may or may not impact your business.

Still not convinced a CPA should be your first hire? Does your business want to make money? If you answered yes, our case has been proven.

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Can My CPA Help With Issues Besides Tax?

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CPAs & Non-Tax Issues

Many businesses and business owners struggle every day with whether or not they should hire a CPA or a financial planner. While sometimes these job titles can be used interchangeably, they often perform very different functions. The majority of CPAs focus solely on tax matters, but there are some CPAs who can actually help with non-tax matters as well.

The one great thing about those in the financial industry is that many financial professionals have a wide breadth of knowledge, especially CPAs. It all boils down to the experience and area of expertise for the particular person in question. You can have expertise in one area but working knowledge in another.

If you want to know whether your CPA can help you with non-tax matters, you simply need to ask them that question. Your CPA knows their own capabilities better than anyone else, and if you’ve hired an honest one, he will be entirely candid about his qualifications. He will also be willing to point you in the direction of others who may be more able to assist you in the event that his own qualifications do not meet your particular needs.

When in doubt, always seek the opinion of another CPA or other trusted individual in the field; not only can they give you an unbiased outlook, but they can also possibly save you from wasting money in the future.

Does your CPA help with non-tax issues? Are they well versed in subject matters outside of tax? In what other ways have they helped your business grow? Leave your comments below.

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Five Traits Every Successful CPA Should Have

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CPA Traits

Hiring a CPA can be a challenging task, especially if you have never hired one before. A quick google search of CPAs in your area will prove to you that the industry is vast and that there are many CPAs available for work throughout the local and national areas. When looking for a CPA, you want to make sure you identify the one who is best for you.

Here are 5 traits every successful CPA should have:

Supportive

I am a firm believer that teamwork makes the dream work, and if your CPA isn’t supportive from the day you meet him or her then they probably are not the CPA for you. A CPA will be responsible for cleaning up any financial messes you find yourself in and you want to be assured that the CPA you hire isn’t just out to get your money but instead is there to help your business grow.

Motivating

While a CPA is in no sense a life coach, they are your finance coach in many ways. It is important that your CPA motivate you to make better financial decisions so that you can improve your overall financial future.

Analytical Thinker

Anyone who becomes a CPA loves numbers and for that reason alone they are able to think on an analytical level. If you meet with your CPA and notice that they don’t think analytically you may want to make sure they are really a properly credentialed and licensed CPA. How can you help manage finances if you don’t enjoy analyzing things to death?

Straightforward

There is no cookie-cutter way to say it, but we all need money to survive. Hiring a CPA who is straightforward and honest with you is imperative to your future success. You want to know not only how to improve your finances but also how you can keep them in a better place in the future.

Confident

As with any profession, it is imperative that the CPA you hire be confident about the expertise they bring to the table. You want to always make sure you have people on your team who are confident in their gifts, especially as it relates to your finances.

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Five Unexpected Ways a CPA Can Rescue Your Business

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CPAs

If your business has ever been in an inescapable bind you know firsthand that you can’t always do everything by yourself. Sometimes you need to enlist the help of others. While a CPA can’t save you from everything, he or she can help you avoid some of the more difficult pitfalls your business can encounter.

Here are just a few ways a CPA can rescue your business:

CPAs Can Help Your Business Save Money

Whether you believe it or not, CPAs can help you save a significant amount of money. They will do this by seeing where you spend the majority of your money and how to eliminate those bad spending habits when possible.

CPAs Can Help Your Business Spend Money

If you have trouble spending money, surprisingly a CPA can help you with that too. They are equipped with the necessary tools to make sure you spend money in the areas which will benefit your business the most.

CPAs Can Automate Your Finances

We waste both time and money when we do our finances manually. While automating your finances may make you as though you have less control, you’re actually increasing your control. The more you automate your bills, the quicker you will be able to gain financial freedom.

CPAs Can Give Your Business a Financial Plan

Do you have specific goals you wish to attain as a business? Are there things you want to accomplish but feel as if you can’t because of your finances? This is where a CPA can step in and come to your rescue. CPAs can offer a financial plan based on the goals you wish to accomplish.

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Thin Lines: What You Can and Cannot Claim on a Business Trip

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Air Travel

Many of you will be traveling during the holidays for both business and pleasure. Although we’ve touched on business trip deductions in the past, we figured it’s time to outline more fully what can and cannot be claimed on a business trip, specifically a trip wherein you may mix business and leisure.

Overview

You’re already planning to travel, and maybe you’re planning to have an extra day at either end of the trip. Or maybe you’ll be traveling near your old stomping grounds, and want to visit some friends from college. You’re allowed to deduct any essential business portions of your trip, but anything that is nonessential cannot be claimed on your taxes. That means if you want to take a detour on your business trip to see an old friend, you can still deduct your airfare to a location so long as the principal reason for your trip is business related.

Devil is in the details

So what does that boil down to? It means that every small expense that is unrelated to your business portion of the trip cannot be claimed. When does this become tricky? Let’s say you travel to Austin for a business trip to meet with a client, and upon arriving in Austin you and the client have a lunch meeting: you are allowed the standard 50% meal deduction. Similarly, if that morning before the meeting you eat breakfast alone at the hotel restaurant, you can deduct 50% of your meal cost. Actually you can claim that deduction at any restaurant in town so long as it’s part of your business trip. But if you’re in, say, the hotel bar and grab lunch with your old college roommate, that’s no longer a business expense and you cannot claim the deduction for that meal–unless of course said former college roommate is the client in question.

The key is moderation and meticulousness. If you’re unsure, ask your CPA or tax advisor: you don’t want to draw the attention of the IRS.

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5 Things You Didn’t Know About Taxes and Nonprofits

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Tax Facts

Whether you’re a regular employee, a volunteer, or starting your own nonprofit, charitable work can be rewarding well beyond a paycheck. However, there are some misconceptions about the tax deductions available to those who assist nonprofits. Check out these things that you may or may not have known about your local (or national) nonprofit.

Volunteers can deduct expenses while volunteering

Nonprofits often rely on two forms of assistance: charitable contributions and volunteers. If you don’t have money to spare, volunteering is a great way to contribute to a nonprofit. As a volunteer, you can deduct travel expenses, clothing or uniform costs, and other out-of-pocket expenses.

Not all nonprofits are tax exempt

Nonprofits are all tax exempt, right? Actually, some organizations such as public schools and churches are not required to apply for tax-exempt status.

Not all tax-exempt organizations can receive tax-deductible contributions

Isn’t that confusing? Generally 501(c)(3) and private foundations can accept tax-deductible donations. However there are 30 different types of tax exempt status, and not all of them can receive tax-deductible contributions.

Employees and officers pay the same taxes as everyone else

Although volunteers are able to deduct their out-of-pocket expenses, regular employees are subject to the same taxes of employees of for-profit companies and not for profit organizations.

Not all financial donations are deductible

Charitable, financial gifts to 503(c)(3) organizations are often deductible, but it’s worth noting that not all donations can be claimed. Perhaps the most infamous example being lottery tickets: if you attend a fundraiser event for a nonprofit and purchase a lottery ticket or raffle ticket the cost of the ticket is not deductible.

Thinking about starting a Nonprofit? Know Your Orgs

Historically the 501(c)(3) was the standard for entrepreneurs who wanted to operate a business with a greater purpose than financial returns to investors. However there are more options available to entrepreneurs who want to give their work a social or environmental purpose. Here are a variety of other options for consideration.

Nonprofit

Simply put, a nonprofit is an organization from which those who run it cannot earn a profit. This is not to say that a nonprofit cannot earn a profit, however all profits must go back into the organization–there is no profit sharing among controlling members. 501(c)(3) status is often known as the “charitable tax exemption,” which allows exemption from federal corporation and income taxes on most types of revenue. Further, 501(c)(3) organizations are able to solicit tax deductible contributions and their volunteers are able to deduct their out-of-pocket expenses.

Not For Profit

Although you may often encounter this distinction, there’s no technical difference between the “not for profit” and “nonprofit” — the two are often used interchangeably. However the IRS has made one distinction: “not for profit” refers to an activity, in contrast to an organization established for purposes other than generation of profit. In sum, you cannot deduct expenses incurred in the pursuit of a not for profit activity.

B Corp (Social Action Corp)

Benefit Corporations are still a fairly new classification. B corps differ from regular corporations in that their investors and entrepreneurs are not committed solely to maximizing the profits of shareholders. Rather, B corps have a legal framework that requires the corporation to also account for environmental and social factors. B corps are not, as it may seem, a for-profit/nonprofit hybrid: a company still elects to be taxed as a C or S corp. B corp status only affects the requirements of corporate accountability, purpose, and transparency. That being said, it’s worth noting that B corps do not qualify for the tax deductions that are specific to nonprofits.

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What to Look for in a CPA

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CPA Questions

Looking for a CPA can be a daunting task, as many prospective clients are largely unfamiliar with exactly what a CPA can offer. We’ve compiled a short list of tips to help you find the right CPA for your needs, including some questions to ask both yourself and your potential CPA.

Credentials

Are you hiring a CPA, or a general accountant? There’s nothing particularly wrong about hiring one versus the other, so long as you know what services to expect in return for payment.

Referrals

Would someone recommend this CPA to you? Who are their other clients? Are most of their clients returning clients? How long have they had most of their regular clients? These are all questions you might consider asking your CPA before employing their services.

Availability

Is this CPA’s availability consistent with your needs (not all are available year-round)?

Advice

Is this CPA capable and willing to offer creative business advice?

Responsiveness

Hiring a CPA doesn’t grant you 24/7 access to them, but you should be able to get a sense of how quickly they will normally respond to your questions or emails. Do they have a response timeframe? Can you call during normal business hours and speak to your accountant? What kind of services require a formal appointment?

Transparency

Make sure your CPA is completely transparent about rates: are they going to charge you an hourly rate to respond to an email or take a 2-minute phone call? Ask up front: if they seem hesitant to give you a clear answer, you might consider looking elsewhere.

Honesty

Understand that a CPA provides a service, and one of those services is *not* to make an otherwise bleak financial situation look better. A CPA is not a money fairy: if you haven’t been honest with yourself about your earnings and expenditures, you might not like the numbers at the end of the day.

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Four Important Questions to Ask Your CPA

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CPA

A good CPA can offer an invaluable service, but how can you determine if a particular CPA will be a good fit for you? Here are a few questions to help get you started.

  1. What services do you offer beyond reporting and number-crunching?

A good CPA can do more than just perform calculations; they should have your best interests as a client in mind. That being said, they should be willing to point out possible deductions or credits that you’re not claiming, which in turn can help you maximize your tax return.

  1. Who are your other clients?

Knowing what kind of clientele your CPA maintains can help you know a few things: do they have returning clients? Are they mostly businesses or individuals? Asking a couple questions about a CPA’s client base could help you decide whether or not a particular CPA is a good fit for your needs.

  1. How are fees calculated?

This will help you not only estimate how much you will pay for services, but will also help you know whether or not your CPA may try to gouge you on pricing. For example, will you be billing an hourly rate for a 2 minute phone call or for a short email response to your questions? A good CPA may still charge for such services, but it may also be indicative of a CPA who is looking to maximize profit for minimal services.

  1. How many people will be servicing my account?

Ideally you will be working with one person, which allows that CPA to familiarize themselves with your account and any particularities.

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Three Tax Tips for Airbnb Rentals

If you own an Airbnb rental, the way you pay taxes is a bit different. You can be a private homeowner, but when you list the home on Airbnb as a vacation rental, or a single room alone, you must claim any income made. In this article we will cover some of the basics of Airbnb ownership from a tax perspective.airbnbpic

14-Day Rule

If you do not rent your property for more than 14 days out of an entire tax year, you do not have to claim the income on taxes. If you use the rental yourself for 14 days or 10-percent of the days it is available for rent, you do not have to claim taxes on the short-term rental.

Record Business Expenses

If you spend money on repairing or improving the rental, you can claim some of those expenses as business expenses. This helps reduce your tax liability. It is important to view the rules regarding what is tax deductible for Airbnb rental owners.

Mortgage Interest on Rented Rooms Only

If you rent a room and not the whole home for 14-days or more, you only pay taxes on the rental income from that room. You will also only be able to deduct business expenses for amounts spent on that room. Mortgage interest and property taxes are 100-percent deductible.

Closing Thoughts

Rather than attempting to figure the taxes on your Airbnb rental out by yourself, hire an accountant to do it for you. Your accountant will separate expenses and determine which credits or deductions you qualify for. This helps prevent mistakes and audits.

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  • Huddleston Tax CPAs / Huddleston Tax CPAs – Shoreline, WA
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    Huddleston Tax CPAs & accountants provide tax preparation, tax planning, business coaching,
    QuickBooks consulting, bookkeeping, payroll, offer in compromise debt relief, and business valuation services for small business.

    We serve: Federal Way, Des Moines, Kent, Auburn, and communities throughout WA and beyond. Call to meet John C. Huddleston, J.D., LL.M., CPA, Lance Hulbert, CPA, Grace Lee-Choi, CPA, Jennifer Zhou, CPA, or Jessica Chisholm, CPA. Member WSCPA.