Why Everyone Needs a Good Accountant

I have always liked the expression: “More money means more problems.” Notorious B. I. G. gets some of the credit, but it makes the case why a good accountant is a valuable member on every team. If you own a business, the need for an accountant is obvious. What about individuals? Why do they need an accountant?

By looking at several reasons, we start to make a case for the value an accountant brings to the relationship. These can be handy, especially if you meet people at holiday parties who announce, “I do my own taxes.”

1. It’s not that simple. From time to time, the Federal government talks about a “postcard sized tax return.” It is possible some people do not need an accountant. If you are single, live in a rental apartment, earn a salary, do not have any investments and don’t give money to charity, your situation might be pretty simple.

Why you need an accountant: If your situation strays from this plain vanilla example, your situation just became more complicated.

2. Only pay what you owe. The tax code is complicated. You have heard the 2014 statistic that the Bible has 788,280 words and the tax code has over a million words.1 It is an incredibly complex document. Filling out a simple return likely misses out on a lot of opportunities allowed within the rules.

Why you need an accountant: An accounting professional has qualified for their role, is licensed and completes continuing education requirements to stay current. They understand what is allowed and what is not.

3. Everyone is unique. This is true to some degree. If you are married, have a business on the side, own rental property or invest in the stock market, your situation changes from the simple example in point #1.

Why you need an accountant: Your situation is unique to you, but to an accounting professional helping hundreds of clients over many years, they know the key areas where you can benefit from the tax law.

4. Financial planning. Many people consider accounting as reporting about things that happened in the past. Filing your tax return for the previous year is a good example. Financial planning looks towards the future.

Why you need an accountant. They are in an excellent position to help you set goals and track your progress.

5. Budgeting. Many people either do not have a budget or do not stick to it. They find themselves sliding into debt, carrying revolving charge card balances and not saving.

Why you need an accountant. They often have a better understanding of where your money goes. They are in an excellent position to help setup a budget you can live with and track your progress with you.

6. Fiduciary. Planning for retirement and investing often involve buying financial products. The person performing the analysis of your needs is often the person making money by selling certain products.

Why you need an accountant: Most accountants are fiduciaries. They are paid to provide advice. You can act on their advice wherever you choose. Put another way, their financial planning advice is portable.

7. A little knowledge is dangerous. It’s been said the value of a good financial advisor is not only do they tell you what to buy, they also tell you what to sell. It’s easy to pick up the first part for free, more difficult to get the second. This applies to accounting also.

Why you need an accountant: You might read an article online telling you how to save money on your taxes. You follow the advice, then discover it was wrong. A good accountant can tell you if that idea is appropriate in your situation.

8. The IRS is scary. Most courts in the US work on the principle of “innocent until proven guilty.” The IRS tends to assume “guilty until proven innocent.” They can freeze bank accounts and garnish wages. The penalties and interest they can apply are severe.

Why you need an accountant: Like a lawyer in a murder trial, you want a professional speaking as an intermediary on your behalf. You do not want to defend yourself.

9. Donating to charity. As people become successful, they also become more generous. There are tax breaks connected with making charitable contributions. Many people know the simplest of the rules.

Why you need an accountant: They can help you structure your gifts to make the most impact at the charity while also delivering the best tax advantage.

10. Minimizing estate taxes. The IRS works on the principle of “pay me now or pay me later.” Estate taxes upon death are an example of pay me later. These rules change over time.

Why you need an accountant: A good accountant understands trusts and estate planning. If not, they know someone who does.

Most financial service firms do not allow advisors to provide tax advice to clients. That is a separately licensed profession. An accountant is a good resource for the client to have on their team. Their expertise reaches into areas beyond the advisor’s.

Related: Does Your Client Live in the Past, Present or the Future?