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it's certainly a worthwhile expense. Further, in the event of an audit, your accountant can represent you during the audit and will know whether it is necessary to engage the services of a tax lawyer. If the error turns out to be the accountant's fault, although the tax liability will be yours, the accountant will most likely cover the costs of the audit (in other words, their time and possibly your penalties). Also, having an intermediary between you and the IRS will surely minimize the possibility that your audit over one or two questions about an item will become a full-blown audit. (For more on my audit experience with my accountant, see Chapter 12, "Insights into an IRS Audit.") Your accountant is a professional; he or she won't take questions personally from the auditor and will know and look out for your rights during an audit.

To find a tax accountant, ask around. Ask your colleagues or a vendor or client whom you do business with. Although there are many "Smith, Jones, Doe, and Steptoe, LLC" firms, I encourage you to look for a one- or two-person shop. (Besides, Smith, Jones, Doe, and Steptoe, LLC doesn't exist; I made it up.) I feel like I get better service from the guy whose name is on the door, as opposed to an "accounting associate." Ask potential accountants whether they've ever worked with a photographer before—or with someone who may be receiving royalties, and how that income should be handled. Do they work with many self-employed sole proprietors or just the corporations, LLCs, and LLPs?

Lastly, an accountant can and will sit down with you and go over budgets and cost-saving solutions. The role the accountant is fulfilling in this capacity is financial advisor or financial planner, and he or she should be certified as such. The notation "CFP" in an accountant's business name (or his or her name) usually is a good indicator that the accountant has the added expertise that can help you with long-range planning—both for you personally and for the business.

What Is a CPA? How Is a CPA Different from a Bookkeeper?

A CPA is a Certified Public Account. CPAs are licensed to practice public accounting and must meet specific educational and experience requirements and pass Board examinations, similar to an attorney or physician. Typically, a baccalaureate degree concentrating on accounting, combined with approximately two years or 4,000 hours of experience in the public accounting field, will qualify you to take the examination to become a CPA.

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NOTE

Each state is different, and the state is the body that issues CPA licenses. The key is that the accountant is licensed/certified.

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As a CPA, your accountant is licensed to be in business as an accountant, has more experience, and participates in continuing education (which varies by state but is typically 40 hours per year) to ensure that he or she is serving you best. Further, certain auditing, accounting, and reviews can only be undertaken by a CPA. A CPA will have broader experience working with attorneys and agents, as well as personal and business financial planning. If you can't get a referral, begin by looking for a CPA at the CPA directory website (www.CPAdirectory.com). Locate several candidates near you and meet with them. Ask questions and ask for references. In addition, there are a wealth of resources at the CPAdirectory website about software and other accounting-related questions.

In contrast, in many small businesses a bookkeeper is neither an accountant nor a CPA. In my business, I have an office manager who, among her other duties, fills the role of bookkeeper. Her job it is to generate estimates and send invoices to clients, pay bills for the business, follow up on unpaid invoices, enter in the splits for credit card payments, and generally use our accounting software from day to day. As my business grew, I trained her to do each of the things I was doing myself, one at a time, and sent her off to learn more about the software. I work closely with her about all things related to the financial aspects of the business.