Business owners know that sometimes it’s necessary to get help with certain tasks. One of the tasks you should be outsourcing is accounting. Whether you just need someone to prepare your taxes for you, or whether you need a payroll service, accounting-related services can be a big help. It saves you time, and allows you to focus on big picture items to grow your business.
However, not every accountant is as honest as you would like. In fact, you need to watch out because tax scams and other problems are bread and butter to some accountants. Here are some red flags to watch out for when working with an accountant:
1. Doesn’t Seem Too Concerned about Documentation
A good accountant encourages you to save receipts and other documentation. Your good accountant also encourages you to keep good payroll and other records. If you have an accountant who doesn’t seem interested in good records, and who doesn’t encourage you to document everything, might be shady. If you don’t have good records, it can be easier for the accountant to hide his or her own indiscretions as well.
2. Charges for Tax Returns Based on Your Refund
For the most part, I only use an accountant for tax preparation. My accountant charges a flat fee for tax prep. However, there are some accountants that might ask for a percentage of your refund. A sure sign that your accountant is shady is that he or she bases your tax prep fee on the size of your refund. This arrangement gives your accountant an incentive to fudge the numbers so that you get a bigger refund — and he or she gets a bigger cut. However, you could be in trouble if the IRS re-examines your return.
3. Won’t (or Can’t) Explain in Understandable Terms
A great accountant can make concepts understandable for you. It’s true that the point of having an accountant is so that you don’t have to spend as much time on those mundane tasks. However, you should still understand what’s going on with your money and your accounting. If you are working with someone who won’t explain what’s going on, that’s a sign the accountant is shady. Your accountant should want you to understand what’s going on.
4. Encourages You to Fudge the Numbers
If you have an accoutant who encourages you to fudge the numbers, he or she might be shady. Yes, it’s the job of an accountant to help you legally reduce tax liability and reap as many advantages as possible. However, there are some things that cross the line. If your accountant is encouraging you to fudge the numbers a little bit, or if it looks like there are complex processes to make your money appear that it’s doing something that it isn’t, you might be working with someone shady. Whether it’s encouraging you to claim a lower income, or whether it’s something to do with payroll, don’t let someone try to convince you to fudge the numbers.
5. Your Instincts Warn You
Don’t ignore your intuition when you feel an accountant is shady. Your instincts might warn you when an accountant is less than honest. Any consideration of an accoutnant should include an interview or conversation to help you get a feel for each other. If you feel uncomfortable, that could be a sign that your intuition is warning you to stay away.