What Can CPAs for Freelancers Do?

By Erin Ollila, Contributor, on April 9, 2018

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I’ll be honest: When I first started my business, I had no clue what a CPA did. I’d heard the term before, but I couldn’t tell you what the first two letters stood for. I knew the “A” was for accountant, but the rest was a guess. When I decided to go it alone as a self-employed professional, I realized I needed to learn exactly what CPAs for freelancers do, and if I should hire one.

What Are CPAs for Freelancers?

“CPA” stands for certified public accountant, and these professionals help keep your business finances in order. They’re different from other accountants: They have advanced education, experience and licensing. CPAs can help you figure out which business entity is right for you, explain tax implications, plan deductions, set up your bookkeeping and more.

Launching a Business Entity

Are you curious about whether your business idea is viable? Talk to a CPA. Go over the startup and recurring costs, your estimated profits and the time it takes you to produce each product or service. They’ll run the numbers to see if it’s a profitable venture. Then, they’ll explain the different ways your business can be structured. Getting advice from a qualified accountant on whether your business should be an S-Corp, C-Corp, LLC, partnership or sole proprietorship is essential, since it can be difficult to reverse or restructure a business entity once it’s created.

If you’re already past that stage and you’ve been working as an independent professional without a registered business entity, you should still meet with a CPA. It’s just as important — if not more — for someone who’s been in business for a while to safeguard their work by registering as an entity.

Understanding Tax Implications and Deductions

Considering hiring one of the many CPAs for freelancers? If you do, you won’t have to worry too much about your finances, as they’ll likely oversee it all for you. But any good accountant will want you to be on board with how your taxes are set up. Why? Well, even though they’ll process your quarterly or annual taxes, you’re still the sole person responsible for your business.

Here are a few things your CPA will consider as they set up your taxes:

  • Are you planning to onboard new employees? If so, you’ll need to set up a payroll system and pay employer taxes for yourself and your team.
  • Do you have to pay sales tax for your products or services? If so, how much, and when? Don’t forget that some areas charge state sales tax, while others charge state and city taxes.
  • Do you do business out-of-state? If so, you may be liable to pay taxes in those areas, too.

Your CPA can also help you plan how to structure your deductions throughout the year to benefit you at tax time. There are many well-known deductions that you may already be aware of, including your business phone, office supplies and advertising. But your accountant will know of other deductions for which you qualify, and how to take advantage of them.

For example, some years you may want to invest more in professional development, possibly by hiring a coach, attending conferences or enrolling in courses. Other years, you may want to spend your hard-earned money on equipment that will help you run your business better, like a new computer or graphic design software. Your CPA can help you determine which deductions to apply, no matter which phase of business you’re in.

Setting Up Your Bookkeeping Structure

Since CPAs oversee finances, they can set up a bookkeeping system that’s easy to manage. Whether you input all the income and expenses into the system or hire a bookkeeper to do it for you, the individual who manages the bookkeeping needs to communicate clearly and regularly with your CPA. If you do decide to hire someone, you may even want to ask your CPA for recommendations.

Remember, your accountant is only as good as your bookkeeping. If you or your bookkeeper aren’t consistently inputting or maintaining records of your income and expenses, your CPA won’t be able to do their best work.

Prepping Financial Statements

Thinking of buying a house, enrolling in graduate school or taking on significant personal debt? Whoever’s giving you a loan will require a ton of financial documents from you, and your accountant will be the one to prepare and double-check all of these statements. And depending on how you’ve set up your business entity, your CPA may be responsible for prepping the annual paperwork. They’ll also be the one to set up all of your tax documentation and send it in for processing — saving you valuable time you can spend focusing on your business, instead.

When you run a business, the advice you receive from a CPA can be priceless. Whether they’re saving you money through deductions or preparing your financial statements for tax season, a CPA will make sure your business is running at its highest financial efficiency.

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