Why Hire an Accountant?
by Jim Park
At the government buildings in Charlottetown, PEI, there's a groove worn into the marble floor leading up to the wicket the tax collectors once worked behind. Legend has it that the taxpayers of yesteryear were so unenthusiastic about paying their taxes that they'd drag their feet as they shuffled toward the wicket to fork over their due.
It's no different today, although the figurative shuffling of feet has been replaced by waiting until the last possible minute to drop our returns in the mail. We stew and we fret, and we moan and groan about not getting value for our tax dollar, but in the end we drag out the shoebox and have at 'er.
There's no really fun way around filing our tax returns, but we can do something about the amount of tax we pay. It's one of those necessary evils that could probably be better managed by calling in some professional help. Think you can't afford to do that? Think accountants are expensive? Truth is, there's likely more to be saved than spent at tax time by hiring an expert.
The downside to waiting until the last minute to tackle the tax problem is that even the best accountant in the world can't undo a year's worth of mistakes, but that's a long-term issue (see sidebar on tax planning).
If you're a company driver with a relatively uncomplicated return, then a tax preparation service might be the way to go, or you might even do it yourself. But business owners, especially sole proprietorships, should be taking advantage of professional advice. Incorporated owner-operators should always be using professional help because the tax returns are more complex and there's more detail required than most individuals are capable of managing successfully.
In selecting your financial service provider (FSP), there's a lot more than cost to be considered. Megan Ashbourn, a certified bookkeeper who works with dozens of owner-operators in southern Ontario, suggests you find help from a source that's familiar with the peculiarities of the trucking industry.
"There's lots going on in this industry that the accountant should be familiar with, such as depreciation schedules and business-related expenses that may not apply to other businesses," Ashbourn says. "But on the other hand, be wary of the coffee-shop accountants. They can lead you in an equally wrong direction."
How to Choose?
Not all FSPs are created equal. Sure, most of them can manage basic addition and subtraction, but how they approach the task and the skills, resources and enthusiasm they bring to the job aren't the same across the board. You're going to be paying for the service, but what it costs is nowhere near as important as what you get for your money.
At one end of the spectrum, you can hire someone to empty out your shoebox, add up all the receipts and put the numbers in the proper columns, then hand you a bill and the bad news. Or, you can hire someone who will work with you year-round, monitoring the revenue and expenses and offering strategic advice on managing the tax filing. Scott Taylor of Transport Financial Services in Waterloo, Ont., likens the comparison between the full-service FSP and the basic bookkeeping enterprise to the difference between a cardiologist and a pathologist.
"The cardiologist can help keep the patient healthy by diagnosing problems as they arise and suggesting countermeasures, whereas the pathologist can only tell you why the patient died," he says.
Here's a short list of factors to consider when engaging the services of some sort of FSP, either a bookkeeper, an accountant, a tax preparer or a combination of the three.
- Is the firm truck-specific? Can they provide counsel, advice, and guidance on all matters relating to trucking, i.e., fuel tax, licensing, permitting, insurance, finance, etc.? Or do you even need such a comprehensive menu of services?
- Do they understand the unique environment of trucking as it relates to personal and corporate tax planning?
- Is the firm a bookkeeping operation with an eye towards filing tax returns, or are they proactive in budgeting, cash management, projections, and estate planning? Can the firm deliver a set of services beyond bookkeeping and tax preparation?
- Business planning is crucial. Can they build an initial plan and manage the process quarterly for the balance of your self-employed career?
- Can they train you to manage your business and to keep your own records?
- What is the relationship between the firm and CCRA? Are they recognized by CCRA? Do they have a successful track record with audits?
- Do they have 'Errors and Omissions' insurance in the event of mistakes found during an audit?
- Is there any reference to the firm's performance on file with the Better Business Bureau?
- Does the firm employ a 'warrior' or 'victim' mentality? Are they aggressive or passive in assuring that you capitalize on every advantage available to you as a taxpayer?
Don't think of this exercise as a cost. It's really an investment. So how much will it cost? According to TFS's Steve Mulligan, the cost is based on the service provided. But look beyond the cost and examine the benefit. If it costs $300, for example, to do a year-end return and a personal tax return, then you've spent $300 to close the year. That's all you get. If on the other hand you spend, say, $1000 on year-round service that provides a quarterly or monthly assessment of the progress of the business, and allows you to plan the year-end with an eye to minimizing the tax burden, that move alone could save three times the cost of hiring the help.
The logic is compelling.
Financial Planning: Some Key Questions
The end of the year isn't the best time to begin worrying about your taxes. There's more here than considering the purchase of a pickup truck in November to unload some of your tax liability. Tax planning starts on January 1st, and ends when you file that year's taxes. The objective is to minimize the tax you're required to pay, of course. And that's in direct conflict with the Canada Customs and Revenue Agency's (CCRA) agenda, which is to allow you to pay as much tax as you want by not taking advantage of all the allowances.
Without putting too fine a point on the issue, CCRA doesn't go out of its way to help you minimize your tax burden. That's why you need to enlist the help of a competent financial service provider.
Here are some tax-planning questions to ponder. Have you done all or most of these this year? If not, it might be too late to salvage 2001, but you might want to consider planning for the 2002 tax season, starting right now.
Did you draw up an initial business plan based on estimates and projections for the year and review your estimates quarterly for the remainder of the year?
Do you understand the difference between capital cost allowance and depreciation as they relate to reducing the tax payable?
Did you plan to write off the cost of the family poodle as a guard dog?
Were you able to predict a surplus of taxable income and then begin planning to defer some of that liability through RRSPs or other mechanisms?
Do you base your business decisions on real-time data, or are you working from a best guess scenario?
Does your record-keeping method provide that real-time data, or just a stale history lesson on what you should have done?
Are you up to speed on tax law, and do you have the resources to keep up with changes in tax law, updates, information circulars and other developments?
Do you have the time and ambition to manage your financial affairs properly?