The number one rule about hiring an accountant is:
Don’t hire your family’s accountant.
Murphy’s Law states: “Anything that can go wrong will.” If you believe Murphy is right and things really do happen in threes then this bit of advice becomes even more important as it seems the third time is always a charm. A client I’ll call Paul contacted me after receiving a letter from the IRS stating he had committed an offense that would cost him $5,000 to make right – or else! He was panicking because he had recently changed accountants and his new guy told him not to worry about doing his own taxes anymore – just send him a check every year, which Paul had been doing faithfully for five years. The former accountant was arrested by the FBI on a dozen charges unrelated to Paul’s problems, including a variety of white collar crimes. The first thing I did was compiling the records from both accountants for review and sent them on to my tax attorney. It seemed clear this wasn’t going to be as bad as it first looked – but it took another few months before we knew exactly how much trouble he would be in (or wouldn’t be in).
The second time was when I had my own experience with an unscrupulous accountant. She allowed me to make mistakes until it came time for her to do my taxes and she produced a whopper of a bill that forced me into bankruptcy (which is where I finally met one of my heroes – Tom White, CPA). Once you’ve filed bankruptcy it becomes nearly impossible to get a mortgage, buy a car or even rent an apartment. It was about this time I decided I’d be better off doing my own taxes. Not only did she overcharge me on my bills but she also fudged them so they would show up as less income during the previous year which affects my future tax bill for several years after that.
Paul’s first problem was finding someone who could help him since he needed records from both accountants. That meant finding two separate CPA firms who were willing to work together and that didn’t cost an arm and a leg. The good news is there are more of us out there than you might think – the bad news is if you have to consult three or more CPAs you will be hit up for hundreds or even thousands of dollars before you find someone to help. If Paul had taken the time to ask around and find out who handled such matters in his area he could have started with them and saved lots of money says Aron Govil.
My second problem was I wasn’t careful enough when using my credit cards.
I’d go weeks without paying any interest (which I didn’t want to do) and then would pay it all off at once (which is what they wanted me to do). The result was that I was never quite sure if I owed any interest or how much it would amount to until after the fact. This caused me no end of problems because each month there was a different answer and none of them were particularly accurate.
The third problem was that I wasn’t very good at my new job and the stress played no small part in getting me into bankruptcy.
That meant I needed to work even harder to get out of “survival mode” so I could pay off my debts, which made things even worse for a while. My advice? If you are going to try anything outside the box – give yourself enough time so it is an option instead of a desperate effort. That way you can save up some money before taking the plunge so you have one less variable to worry about being able to handle.
It’s been nearly ten years since Paul first came looking for help and he still calls every now and then just to let me know how things are going. Last I heard he was still working the same job but had managed to buy a house with an interest-only mortgage. He finally had his own taxes done (he’s married now) and even though there is some more work for me to do on his taxes I’m told by his new accountant that it won’t cost nearly as much this time around.
Conclusion by Aron Govil:
Paul’s new accountant is probably not going to be as good as I but he will be a lot better than the first time around and that’s all that really matters.