Author Topic: Find another accountant or go back to DIY?  (Read 1869 times)

LightStache

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Find another accountant or go back to DIY?
« on: November 11, 2021, 01:48:21 PM »
I started an LLC in 2019, made some money in 2020, and hired an accountant in late 2020 because I wanted to explore S-Corp or C-Corp election.

But working with my accountant has been awful. He filed paperwork with the IRS and forgot my signature, which caused hangups and delays that I had to spend months unwinding, never acknowledging his mistake. He recommended S-Corp election without doing any calculations -- I think that factoring in the QBI deduction I'm actually paying more taxes now. He miscalculated my withholding by a large amount, calling me less than 24 hours before he wanted me to send in a $20K payment. He didn't know how to handle payroll taxes with a retroactive S-Corp election. He second guessed my defined benefit plan administrator, scheduling multiple annoying telecons, and THEN CHARGED ME EXTRA FOR IT. He was supposed to handle my bookkeeping, but AFAIK hasn't even looked. He leaves his tax questions unaddressed until the last minute before filing. His data gathering process is really time consuming. He asks me the same questions multiple times, including CYA emails, and hints at us litigating. He claimed the QBI deduction, but didn't ask me the relevant questions to see if I qualified for it (it's questionable). My blood boils every time I get a call or email from him.

I'd love to have an accountant that can provide strategic advice and oversee my bookkeeping, but it seems like the standard is $3K just to fill out tax forms. I'm really frustrated and don't want to go through another year of the same BS with another low caliber accountant. At this point I'm thinking that my solo $300K revenue business just isn't big enough to afford the kind of service I want. Fellow entrepreneurs, what's your experience and advice?

Chris Pascale

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Re: Find another accountant or go back to DIY?
« Reply #1 on: November 11, 2021, 09:36:10 PM »
I have an MBA in accounting and don't do my own taxes, so reco you get someone who is (A) competent enough to submit signed docs, and (B) has the integrity to own a mistake.

Here's the website of the firm I use (my late father started it). Ed Duras is the guy I use, but all of these guys are very good.

http://pracpas.com/
« Last Edit: November 13, 2021, 08:27:43 PM by Chris Pascale »

Kroaler

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Re: Find another accountant or go back to DIY?
« Reply #2 on: November 15, 2021, 07:00:34 AM »
I wonder what amount of people here are doing their own vs an accountant and what the correlation is between revenue and diy able or not.   


SeattleCPA

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Re: Find another accountant or go back to DIY?
« Reply #3 on: November 19, 2021, 10:49:22 AM »
If you should use an S corporation, you should be able to afford a competent CPA. E.g., the S corp saves you $10K in payroll taxes and you then give up $2K to the CPAs.

But it's pretty uneconomical to outsource the bookkeeping. That work, usually, you should do yourself using QuickBooks, Xero, FreshBooks or something similar. (Not Excel. Not an old grocery bag.)

BTW it's possible you should not be an S corporation. Usually S corporations save more than the QBI deduction does. But not always. You have to do the math.

In that case, if you're operating as an LLC taxed as a disregarded entity (so a Schedule C sole proprietorship), that is often a DIY situation. (You still need a decent accounting system. And you'll make mistakes. But probably not bad ones.)

BTW we've got a bunch of related articles on this subject at our CPA firm blog, but here's one that might help you figure out whether your S corp saves you taxes: https://evergreensmallbusiness.com/s-corporation-section-199a-deduction/

Kroaler

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Re: Find another accountant or go back to DIY?
« Reply #4 on: November 21, 2021, 11:23:01 AM »
I agree with the "if you need s corp you can afford an accountant".

I think a lot of people get stuck in year 1 where revenue was super low and the cpa cost could very well exceed the tax liability.   

I'll have to check the blog entry of s corp vs other. 

SeattleCPA

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Re: Find another accountant or go back to DIY?
« Reply #5 on: November 22, 2021, 07:07:42 AM »
I agree with the "if you need s corp you can afford an accountant".

I think a lot of people get stuck in year 1 where revenue was super low and the cpa cost could very well exceed the tax liability.   

I'll have to check the blog entry of s corp vs other.

A reasonable option would be to operate as a single member LLC that just reports its income and expenses on a Schedule C inside the member's (owner's) 1040.

E.g., someone forms an LLC for a new business and operates the business for a decade. To keep costs low, though, they operate as an S corporation for years 2 through 8. That's when the savings generated from the S corporation justify the cost.

For year 1 (a startup year) they ARE an LLC but they use the Schedule C approach.

For years 9 and 10 (the wind-down years) they are STILL an LLC but again use the Schedule C approach.

Caution: Electing S status for an already operating LLC and "un-electing" S status are not DIY projects. The deemed incorporation when you elect and the deemed liquidation when you "un-elect" very possibly trigger tax consequences.

But you should be able to form an LLC and use the simple approach for year 1 or years 1 and 2.

Final tip: You can make S elections very, very late. E.g., while the law says you much elect S election for 2022 by 3/15/2022, you can practically do it anytime in 2022. (You just need enough time to do payroll for the shareholder employee.)

LightStache

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Re: Find another accountant or go back to DIY?
« Reply #6 on: November 28, 2021, 02:04:25 PM »
Thanks for the feedback! I'm still on the fence, but I guess I'll have to make the decision soon if I want to get another accountant and file on time for TY21.

Michael in ABQ

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Re: Find another accountant or go back to DIY?
« Reply #7 on: November 28, 2021, 05:06:07 PM »
I filed S-Corp election with the IRS back in the spring or summer. I just got a letter from the IRS last week where they accepted it. So that was at least 3-4 months.

LightStache

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Re: Find another accountant or go back to DIY?
« Reply #8 on: November 28, 2021, 05:26:26 PM »
So I did a late election with S-Corp status approved starting 1/1/20.

This calculator -- https://beforetax.co/s-corp-tax-calculator/ -- says I'm only saving $38 total in taxes compared to sole prop. That savings is more than overcome by added cost for payroll and tax prep that comes with the S-Corp. More importantly, I'm going to lose way more than $38 due to reduced future SS benefits.

SeattleCPA

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Re: Find another accountant or go back to DIY?
« Reply #9 on: November 29, 2021, 02:42:00 PM »
So I did a late election with S-Corp status approved starting 1/1/20.

This calculator -- https://beforetax.co/s-corp-tax-calculator/ -- says I'm only saving $38 total in taxes compared to sole prop. That savings is more than overcome by added cost for payroll and tax prep that comes with the S-Corp. More importantly, I'm going to lose way more than $38 due to reduced future SS benefits.

I don't know that calculator. So I'm not commenting on the specific results you've shared. But it is really easy to pull the trigger on the S corporation thing too soon.

S corporations rarely make sense for part-time or sideline businesses. Especially if you've got a FT W-2 job.

Some states (like California) make it harder to make the numbers work.

This blog post from six years ago digs into the dirty details: https://evergreensmallbusiness.com/should-you-use-an-s-corporation-for-a-sideline-or-part-time-business/

Sandi_k

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Re: Find another accountant or go back to DIY?
« Reply #10 on: November 30, 2021, 12:11:31 AM »
@LightStache - we have a good enrolled agent here in CA - what state are you in?

She did our S Corp taxes plus personal taxes with Schedule C and SE forms for about $1500 total.

SeattleCPA

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Re: Find another accountant or go back to DIY?
« Reply #11 on: January 17, 2022, 11:49:48 AM »
@LightStache - we have a good enrolled agent here in CA - what state are you in?

She did our S Corp taxes plus personal taxes with Schedule C and SE forms for about $1500 total.

Those seem like fair prices. But a compulsive personality requires me to say that I hope the Schedule C and SE aren't being used in place of "real" W-2s for shareholder-employees. Because that approach really isn't the right way to handle paying owners. (It also would have prevented business owners from getting the right-sized PPP loans.)

Sandi_k

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Re: Find another accountant or go back to DIY?
« Reply #12 on: January 19, 2022, 09:47:38 AM »
@LightStache - we have a good enrolled agent here in CA - what state are you in?

She did our S Corp taxes plus personal taxes with Schedule C and SE forms for about $1500 total.

Those seem like fair prices. But a compulsive personality requires me to say that I hope the Schedule C and SE aren't being used in place of "real" W-2s for shareholder-employees. Because that approach really isn't the right way to handle paying owners. (It also would have prevented business owners from getting the right-sized PPP loans.)

1) We didn't apply for any PPP loans, as the corporation was disbanded a couple years prior to the stimulus.

2) DH works as a 1099 for other companies at times, plus took a W-2 salary from the company, and then we had the owner draw-down as well.

3) No shareholders other than us.