Accountants for Doctors: What to Look For In A CPA
As a physician, you may wonder whether accountants for doctors are necessary. Do you really need someone to advise you about how to handle your money? Ultimately, you want to take care of your money well, and in some cases, the only way you can do so is to hire the right professional to handle your money.
By the time you finish reading, you’ll have a clear understanding of whether physicians need CPAs, when you should use an accountant (and when you may not need one), the steps to find a CPA, and other details. Let’s dive in.
EA vs CPA: What is the difference?
An enrolled agent (EA) is a tax advisor authorized by the U.S. government to represent taxpayers and licensed by the Internal Revenue Service (IRS). EAs must pass a three-part series of tests called the Special Enrollment Examination. The enrolled agent exam focuses mostly on tax preparation and less on accounting practices, which cover individual and business tax laws and representation issues. EAs must complete 72 hours of continuing education every three years and comply with certain standards established by the Department of Treasury.
Certified public accountants (CPAs), on the other hand, have a larger repertoire. A CPA for physicians study tax issues and must also become well-versed in other technical aspects of accounting, such as financial planning and auditing. They must complete a four-part Uniform Certified Public Accountant Examination. States have individual rules for maintaining a license (including 40 hours of continuing education per year) as well as the requirement to follow certain ethical rules and regulations.
In short, CPAs have a more expansive repertoire than EAs, which is important to consider when you choose the right accountant for your needs.
Which is better?
Which should you choose — a doctor CPA or an EA? It depends on the type of services you need.
If you have collection problems or are facing an audit from the IRS, getting an EA on your side might make sense. If you need help with tax prep or financial planning, an EA can help you and can perform bookkeeping work to prepare a tax return.
CPAs can handle all manner of taxes (not just tax deductions), including tax preparation, tax planning, financial planning, and accounting. They can help you lower your tax bill and answer other questions you may have about estate/trust/gift planning and business planning. They can also represent you in an audit.
Do physicians need to use an accountant?
Physicians may need a CPA, particularly if they need help with broad accounting services, as opposed to specific tax issues that an EA can help you tackle. You should use a CPA doctor option if you are a:
- Self-employed contractor: If you get paid by 1099, an expert will take the time to help you with your financial plan when you own a business.
- Investor/owner of an S-corporation or Partnership: If you are part of an S-Corp or Partnership, you may need to
- High-income earner: You have a higher chance of being audited if you earn over $200,000, particularly if you file your own taxes. Furthermore, if you have more than $1 million in investable assets, your taxes will likely be more complicated.
- Real estate investor: If you’re a real estate investor or earn passive rental income, improper reporting can affect your tax liability for years. A CPA for doctors would be appropriate in this situation.
Which doctors do not need a CPA?
You may not need a CPA if your taxes are fairly simple. In other words, if you are paid by W2 wages, don’t itemize, or don’t have outside business interests, you may not need a CPA. However, if you need to implement more plans, a CPA might be appropriate.
Steps to find a great CPA
What are the steps to finding a great CPA?
Step 1: Ask around for a good CPA in your area
Talk to everyone you know about who they use as a CPA, particularly other physicians. Your colleagues likely know of excellent CPAs that they work with.
Step 2: Make an appointment with a few CPAs
Before you make a final decision, meet with several CPAs before you make a final decision. You may work with this individual for years, so you’d better make sure you enjoy a level of trust (and even camaraderie!) with the CPA you choose to work with. Ask a few critical decisions before you make a final decision, including the following:
- Why do I need a CPA to work with me?
- Will I meet with you or a team on a regular basis?
- What types of services do you provide? Does your firm also provide insurance, investment advice, etc.?
- How will you communicate with me before and after tax season? Will you reach out during a certain part of the year?
- Do you have other clients who are doctors like me? How do you handle the unique tax situations that physicians bring to the table? Who is your ideal client?
- How do you review tax returns before they are filed to ensure that nothing gets overlooked?
- What types of continuing education do you comply with?
- What would happen if I had to undergo an audit? How do you traditionally support clients who get audited by the IRS?
- How much does it cost to have taxes done?
- Why did you lose your last client?
Step 3: Check credentials
It goes without saying that you should check the credentials of the individual you meet with, but also check the rest of the firm’s credentials as well. While you likely won’t dive into the exact specifics of each individual’s educational training, you may want to know the exact credentials that lead to a CPA (but again, it depends on your state requirements). It might look like this:
- Bachelor’s degree
- 24-semester units in both accounting- and business-related subjects
- 150-semester units of courses
- Passing the Uniform CPA Exam
- Passing the Professional Ethics Exam for CPAs
- One year of general accounting experience supervised by a CPA with an active license
Step 4: Choose your accountant
Once you think you’ve made your decision, go with the accountant you’ve chosen. Hopefully, you’ll be a match and can work together well throughout your career. It’s wonderful to have an accountant who knows your business inside and out and always looks for ways to save you money as a practicing physician.
Get an unbiased second opinion at least once
It’s smart to get another opinion if you’re not sure that your accountant is cutting in. Don’t be afraid to cut ties if your accountant doesn’t treat you well or continues to make mistakes. It’s true that accounting errors do occur, but if they continue to be a problem, that’s not going to help your business in the long run.