The only question I get asked more often than, do I need a financial advisor, is do I need an accountant. The answer isn’t that complicated for most people, however, as with all things money and finance, there are always some exceptions that seem to throw off the ability for anyone to give a straight answer. So, let’s start with with what an accountant does and does not do, and then move on from there. The spoiler, if you are chomping at the bit to get a quick answer, is probably not, but let’s examine the angles to be sure.
What Does An Accountant Do?
First of all, before deciding whether or not you need an accountant, you should probably understand what an accountant does. More importantly, you should probably understand what an accountant does not do.
Now, just like other professions, there are accountants who do more than accounting. I actually know some accountants who are also financial advisors. After all, there is some merit to wrapping all of your financial needs into one little package from the same professional you already trust. But, for our purposes here, we are going to focus on just accountants. That is, do you need someone to do accounting for you.
Accountants, or CPAs (Certified Public Accountants) undergo a lot of schooling, and then have to pass an exam like the Bar Exam for lawyers in order to become a CPA. This is a lot of knowledge and understanding of complicated accounting rules and procedures. Just like there can be simple issues that a lawyer helps you with, there can be simple issues where an accountant might be helpful. But, for the most part, these professionals are best used for specific needs when a situation arises that you cannot handle on your own. They are not typically useful for doing something in a “better” way that you don’t understand because you are a layman.
For the purposes of this article, we can break people down into four groups, financially speaking.
The first group is the very wealthy. These people earn as much, or more, from their investments, inheritance, trust funds, or shares in the family business as they do from any job they happen to work in. If you fall in this category, you probably already have an accountant, and you probably need him, if for no other reason than to back check other financial professionals who might be working for you.
The second group of people is those whose income comes from working a job. That is, any income you get from other sources such as investments or a small business is nothing more than extra, or side income. The money you use to actually pay the mortgage and live your live comes from working a job. Your taxes each year involves plugging in the information supplied by your employer on your W2 form, and then entering in some deductions like mortgage interest, student loan interest and property tax deductions. If this is you, then you most likely do not need an accountant. After all, what exactly would the accountant be doing for you that you can’t do yourself?
The third group of people is that in unusual circumstances. For example, if you work a regular job, but you get quarterly royalties from some oil leases that you got somehow from family land, or something. Or, if you had a job but got hurt and have some large settlement. Basically, your financial situation is unique enough that you simply cannot find good information that applies specifically enough to you. These situations almost always involve income or assets that are not standard to anyone else you know. In this case, you likely need to at least consult an accountant periodically to ensure that what you are doing both makes sense, and doesn’t lock you into future decisions due to regulations or taxes.
The fourth group of people is the hardest to sort out for a yes or no answer. The fourth group are people who own their own business and derive a large part of their income from the business. Answering for this group could that several posts, so we’ll break it down simply for now. First, if you have an actual payroll where you are responsible for withholding and reporting taxes for more than two or three people, chances are you are going to need some sort of assistance unless you are willing to study and learn about accounting rules and accounting software. If you are willing to do that, then more power to you. This isn’t a societal secret, it can be learned, especially if you only care about your own situation. However, it will take some effort and work.
If you own your own business and only have one or two employees (not counting your spouse), then you probably do not need an accountant, unless you simply do not want to have to deal with the bookkeeping and taxes. If you fall into this category, get some financial software and tax software that is designed for business. With a little bit of effort, you should easily be able to handle your own books and taxes.
Accountant Yes or No?
As always, no one knows your situation better than you do. If you cannot figure it out, or if you are perpetually worried, then professional help is always an option. If you just are wondering if you are not supposed to be doing this stuff yourself, then stop worrying. With some attention and learning, you’ll be just fine.