Local or Online Bookkeeper: Does Location or Industry Matter?

Local or online bookkeeper: does location change the work?

A bookkeeper's location rarely changes the bookkeeping. The IRS puts the duty on the records, not on the bookkeeper's address: they must clearly show income and expenses and stay available for IRS inspection, and except in a few cases the law does not require any specific kind of records (Publication 583). What changes the work is what your books have to cover:

• States: where you sell, employ people (an employee bookkeeper counts) or operate.
• Platforms: marketplaces and payment apps that pay you after taking fees.
• Industry: job-based billing, inventory and other special record rules.
• Access: who can open the accounting file.
• History: months or years that are behind, or a notice that has arrived.

A short, ordinary list leaves either option; a long one points to whoever already handles those items. The case stops being routine when no one you are considering covers one of those rows, a remote candidate asks for logins you are unsure about, months are behind or a notice has arrived, or a corporation or two countries are involved. Settle these with a professional before you sign: the states and platforms to cover, who owns the file and administrator login, and how a handover or trial month would run.

Gather before you talk to anyone: the states you sell to and employ in, the platforms and payment processors you use, your accounting software and who holds its administrator login, last year's returns, and bank and card statements.

Does my bookkeeper need to be licensed or located in my state?

Bookkeeping generally needs no license, so no federal source requires the bookkeeper to live in your state; what matters is whether the person knows how your state's taxes work (next section). The federal Occupational Outlook Handbook names no license for bookkeeping, accounting and auditing clerks and says certification is not usually required (BLS). That describes the occupation nationally and cannot confirm every state's rules, so ask any candidate what, if anything, your state requires of them.

Credentials matter when someone speaks for you to the IRS: enrolled agents, CPAs and attorneys have unlimited representation rights, and preparers without one of those credentials have limited or no authority to represent you (IRS credentials). Federal rules count a CPA qualified in any state, territory or possession, so a CPA may practice before the IRS whichever state issued the license (Circular 230, sections 10.2 and 10.3). State licensing and state tax agencies are separate matters: ask whether the person can work with your state's agencies. For who may prepare your return and how to check someone's credentials, see bookkeeper, accountant or CPA.

Is bookkeeping state dependent: sales tax, payroll and state income tax?

The bookkeeping method is the same everywhere; the taxes the books must track are set state by state. Each state publishes its own rules, and the IRS links to every state's tax site (IRS state links).

Each state also sets its own seller threshold, and what counts toward it can differ, so a bookkeeper who tracks one state's test can miss another's. A threshold does not cover a seller with a physical presence there, such as inventory or staff (California; Texas). For the thresholds, see where you must collect sales tax; for the setup, tracking sales by state. The work each state requires can widen the scope of a bookkeeper's job and the quote.

The bookkeeper's own location matters in one case: an employee is generally covered by the unemployment insurance law of the state where the work is performed, and states test strictly who is an employee rather than a contractor, so an employee bookkeeper in another state can add that state to your payroll accounts (Labor Department).

Does my bookkeeper need experience in my industry, or is general fine?

Industry experience matters only where an industry records revenue or costs in a special way. The IRS publishes audit guides for industries because they have accounting methods and issues unique to them. The guides train examiners and are not law, but owners and preparers can read them.

The audit-guide list also includes entertainment, oil and gas, child care providers and attorneys. Many other businesses have no audit guide of their own; for those, a general bookkeeper may be enough. The test is the same for any industry: ask the candidate to walk through how one of your typical transactions would be recorded. For online sellers, what differs is the platforms, covered next. For job-based billing, see construction job costing; for cash sales, see cash sales records.

Does my bookkeeper need to know my accounting software and platforms?

The platforms that pay you can matter as much as the brand of accounting software, as long as the IRS can read the file. Platforms report differently from how they pay: Form 1099-K shows the gross amount, without regard to fees, refunds or shipping (IRS instructions). A payout deposit therefore rarely equals the form, and if you accept payments on several platforms you could get more than one form (IRS). Ask the bookkeeper to reconcile a payout, meaning to match it from gross sales through fees and refunds to the deposit; see reconciling sales and payouts.

On software, the IRS says it can read files from the programs most businesses use and asks you to check with the examiner before submitting any electronic files (IRS FAQ). Computerized records must reconcile with your books and return and be documented (Publication 583). Software the bookkeeper uses daily and your accountant can open is the practical test; see choosing accounting software.

Who should own the accounting file and administrator login?

Keeping both with the business owner fits what the IRS asks for. The IRS holds taxpayers responsible for keeping sufficient books and records, and in most examinations of a business that keeps its books in accounting software it requests the backup file and the administrator's username and password (IRS FAQ). A file re-created for the IRS does not satisfy that request, because it is not a copy of the real books and records. An owner who holds the administrator login can hand over a backup, using a temporary password the IRS suggests for the purpose, without sharing the permanent one.

Owners often create the file in the business's name, keep the administrator role, and give the bookkeeper a named user. Circular 230 requires a practitioner (CPAs, enrolled agents and attorneys among them) to promptly return, on request, the client records needed to meet federal tax obligations, and a fee dispute generally does not excuse it; but a return, schedule or other document the practitioner prepared is not a client record while it is held for unpaid fees on that document (Circular 230, section 10.28). The same duties reach anyone paid to prepare all or a substantial portion of a document for the IRS (section 10.8). A bookkeeper who prepares nothing for the IRS, or a CPA hired only to keep books, may fall outside the rule, so put ownership and return of records in writing and keep the file in the business's name. For setup, see giving a bookkeeper access without losing control.

How do I share documents and bank access with a remote bookkeeper safely?

Give each person a separate login and remove access when the work ends. Publication 4557 is the IRS's data-security guide for tax professionals; its basic steps are a fair yardstick for anyone remote who sees your records (Publication 4557):

• Multi-factor authentication for anyone accessing customer information.
• Encryption of sensitive files and emails.
• Access limited to people who need it.

The same guide says tax return preparers must create and enact a written security plan under the FTC Safeguards Rule. If the person also prepares tax returns, ask whether they have one; for a bookkeeper who does not, ask what security steps they follow instead. For bank access that lets the bookkeeper read activity without moving money, see giving a bookkeeper access.

If the bookkeeper also runs payroll, the business stays responsible for every federal deposit and return, and a person responsible for paying over withheld taxes who willfully fails to can be personally liable (IRS; Publication 15). The IRS says employers should enroll in its federal tax payment system under their own PIN to check deposits. For who pays when a bookkeeper errs, see who pays the penalties.

Should I pay a bookkeeper hourly or monthly, and does it depend on where we are?

The pricing model follows the scope of the work, not the bookkeeper's location. No official source sets bookkeeping fees, so these are tests, not rules:

Ask what drives the quote: transactions, accounts, platforms, states, payroll, and any months to catch up. Ask what is included, such as reconciliations, sales by state and year-end support, and how out-of-scope work is billed. For ranges and fairness, see what a bookkeeper costs per month.

Local CPA or remote bookkeeper: which fits which job?

Choose by the job, not the address. When a notice or an examination could arrive, have a CPA, enrolled agent or attorney, local or remote, because those credentials carry unlimited authority to represent you (IRS credentials); for day-to-day books, choose whoever already handles your platforms and industry. These weights are judgments, not official rules:

For the choice between a bookkeeping bundle and a CPA firm, see online bookkeeping service or CPA firm.

How do I test the fit with a trial month or sample close?

Give each candidate the same past month and compare their finished books with numbers you already know.

1. Pick a past month whose bank balance and platform payouts you can check.
2. Ask each candidate how they protect your data first (see above). Then give each the same month with a deadline: remove account numbers, customer names and tax IDs where you can, and use read-only access where you cannot.
3. Compare the results: ending bank and card balances match the statements, each payout ties from gross sales to fees, refunds and deposit, sales by state add up to the total, and payroll liabilities match what was filed.
4. Ask each candidate to list what they could not classify and what they assumed.
5. For a paid trial month, fix the scope and an end date, and keep the administrator login yourself.

For the questions to ask and the red flags, see questions to ask before hiring a bookkeeper. To check ongoing work, see checking your bookkeeper's work.

Example

These examples are illustrative and use US dollars.

An online seller on three marketplaces

A seller in Ohio sells on three marketplaces and ships to 12 states. Her local bookkeeper records each deposit as sales. One marketplace shows US$10,000 of sales in a month, US$1,200 of fees, US$300 of refunds and a US$8,500 deposit. Booked by deposit, gross sales are US$1,500 short, and neither the fees nor the refunds appear as their own lines, while a Form 1099-K, if the marketplace sends one, reports the gross amount. She compares a remote bookkeeper who works with online sellers and asks each to match one month of payouts from gross sales to the deposit and show sales by state.

A remodeling company in Chicago

A remodeling company bills a US$60,000 job in three US$20,000 progress billings, and the customer holds back US$2,000 of each as retainage. A bookkeeper who records only deposits shows US$54,000 received and has no record of the US$6,000 held back, so the owner cannot see what is owed on each job. The owner asks for a trial month that shows, job by job, what was billed, received, held back and spent. If a general bookkeeper cannot produce that view, look for someone who has kept construction books.

A Florida business with a remote bookkeeper

A Florida home-repair business hires a bookkeeper two time zones away. They agree on a weekly 30-minute call, read-only bank access, a named user for the bookkeeper in an accounting file the owner created and administers, and a first assignment that redoes one past month the owner can check against the bank statement. At the end of the month the owner compares the closing balances with the bank statements before agreeing to continue.

Different for you?

• No one you are considering covers your platform, industry or states, or a remote candidate wants logins you are unsure about: work out which states and platforms the books must cover, who owns the file and administrator login, and how a handover or trial month would run before you sign; see bookkeeping help.
• Your books are months behind, or the numbers do not match your statements: see catching up on overdue books and get bookkeeping help.
• You are replacing a bookkeeper mid-year: see replacing your bookkeeper.
• You sell on marketplaces or your own store: see ecommerce bookkeeper scope and cost.
• You sell in several states and may have crossed a threshold: see tracking sales by state and where you must collect sales tax.
• You run an S corporation: see S corporation bookkeeping.
• You operate in the US and Canada: see books for a Canadian company and its US company.
• The bookkeeper you are considering is based outside the US: see hiring an offshore bookkeeper.
• A notice arrived, or a bookkeeper's mistake led to penalties: see who pays the penalties and get bookkeeping help.