Online Bookkeeping and Tax Bundle vs CPA Firm: What to Check

Should I use an online bookkeeping-and-tax bundle or keep a CPA separate?

Neither label decides it. A bundle is a pricing format, not a credential: anyone with a preparer tax identification number (PTIN) may prepare federal returns for pay (IRS: choosing a tax professional), and a CPA firm can sell a flat fee too. Five written answers decide it: who signs your returns, who can speak for you to the IRS, which filings the fee covers, who owes if a payroll deposit fails, and who holds your records and logins. The IRS sets rules for preparers and employers, not for what a bundle includes, so the written scope is your only guide.

Compare the total, not the monthly fee. Add what the fee leaves out (state returns, payroll filings, catch-up months, answering a notice) and set that against a CPA's written quote for the same list. For what drives a monthly fee, see bookkeeping cost per month.

If one provider holds books, returns and payroll, a single scope gap or closure can reach all three. If you already pay for a bundle, or a platform just closed, and any of these apply, the written scope, your last returns and the accounting file are what a professional needs to see first.

Gather before you compare: the written scope or terms, the list of returns filed last year, payroll provider reports (quarterly and year-end), an export or backup of the accounting file, and bank and card statements.

What goes wrong with cheap online accountants?

A fee does not show which of these a service covers; the written scope does. Each failure below ties to a rule you can check before you sign, and has its own section.

Who prepares and signs my return, and who can speak for me if the IRS writes?

A paid preparer generally must sign the return, enter a PTIN and give you a copy (Form 1040 instructions; 26 U.S.C. 6107); whether that person can then speak for you depends on the credential. The instructions for Form 1065 and Form 1120-S say the same for partnership and S corporation returns, and say the owner signs too: a partner or LLC member on a partnership return, an authorized officer on a corporate return. The IRS says the taxpayer is legally responsible for what is filed (IRS: preparer misconduct).

Source: IRS credentials page; the Record of Completion condition is in the Form 2848 instructions. Every row needs a PTIN to prepare returns for pay (IRS: PTIN requirements). Ask for the name of the individual who will sign. For the roles of bookkeeper, accountant and CPA, see bookkeeper vs accountant vs CPA.

Which returns are inside the flat fee: federal only, or state, payroll, sales tax and 1099s too?

A flat fee covers only the filings its contract names; each filing below has its own form, agency and due date.

Whether a state needs a return is that state's rule, found on its tax agency's site; a price page does not decide it. See also which returns your business files.

Is catching up old books or fixing last year's mistakes in the price?

Only if the written scope says so. No IRS source decides what a monthly fee includes, so treat three jobs as separate until the scope names them: older months with no books, cleanup of a wrong or inherited file, and corrections. Corrections include amended returns and payroll correction forms such as Form 941-X (Publication 15). For each job, ask whether it is included or quoted separately, what triggers an extra charge, and who prepares and signs the amended filings. For cost drivers, see catch-up bookkeeping cost; for which route fits a messy file, see bookkeeping cleanup or start fresh.

If the service runs my payroll and misses a deposit, who owes the IRS?

Generally the employer owes. Under the employment tax rules, a payroll service provider or reporting agent that misses a deposit is not liable as the employer or the employer's agent; it files under your own EIN, and what it owes you under your contract is a separate question. The IRS may assess penalties and interest on the employer's account, and the employer may also be held personally liable for certain unpaid taxes (Publication 15, section 16; IRS: outsourcing payroll duties).

Some arrangements differ. An agent with an approved Form 2678, or a payer the IRS designates, files under its own EIN and is jointly liable with the employer. A certified professional employer organization is generally treated as the employer for the wages it pays, though you may also be treated as an employer of certain employees. Ask which arrangement the service uses and whose EIN files your returns.

Late deposits carry a penalty of 2% to 15% of the unpaid deposit, depending on how late it is and whether the IRS has already sent a notice; the rates do not add up (IRS: failure to deposit penalty). Unpaid withheld income, Social Security or Medicare tax may also bring the trust fund recovery penalty, 100% of the unpaid trust fund tax, against each responsible person who acted willfully (26 U.S.C. 6672); Publication 15 says that can include an officer, partner, employee or accountant. The IRS generally has 3 years from April 15 after the payroll year, or from the return's filing date if later, to assess it, and no time limit while the return is unfiled (IRM 5.7.3).

• Watch the deposits yourself. When a third party enrolls you in the IRS payment system (EFTPS), you receive an Inquiry PIN. Use it to confirm each deposit (Publication 15).
• Keep your own address on file with the IRS. IRS letters go to the address of record; moving it to the provider's can limit what you learn. Update it with Form 8822-B.

If a notice has already arrived, see payroll provider did not pay your taxes and bookkeeper mistakes: who pays the penalties.

What happens to my books and records if the service closes or I leave?

You must keep the records, whoever holds them. Every person liable for a tax must keep records (26 U.S.C. 6001), and the IRS says taxpayers are responsible for keeping books that support the return and producing them in an examination (IRS: accounting software records FAQ). A service that closes does not change that.

• How long. Generally until the period of limitations for the return runs out: 3 years after filing in the usual case, and longer in some situations (Publication 583). See how long to keep business records.
• What an examiner often asks for. The accounting software backup file and the administrator's login, rather than spreadsheet exports. A file rebuilt by re-entering transactions does not meet the request (IRS FAQ). If the service holds the only administrator login, producing that file depends on the service.
• What a preparer must return. A practitioner must, on request, promptly return the client records the client needs to meet federal tax obligations, and a fee dispute generally does not excuse it, within limits the rule sets (31 CFR 10.28). Circular 230 does not automatically cover an uncredentialed preparer who only prepares returns (IRS: ethical tax practice); Annual Filing Season Program participants agree to its practice standards (IRS: program FAQ). For any other provider, including a service that only keeps books, the contract and state law decide, so get the records-return and accounting-file export terms in writing.

Keep your own copies of signed returns, payroll reports, bank and card statements, and a current backup of the accounting file. See records to keep when you cancel accounting software. If a service has already gone or holds your file over an unpaid bill, see taking over books from a former accountant.

Who can see my bank logins and tax data?

Anyone you give a login or a file to, so grant only what the work needs. A return preparer must keep a written plan to protect client data: the IRS says the FTC Safeguards Rule requires tax return preparers to create and carry out security plans, and that failing to do so may lead to an FTC investigation (Publication 4557). Federal law also makes it a misdemeanor for a person in the business of preparing income tax returns, or providing services in connection with preparing them, to knowingly or recklessly disclose information furnished for a return or use it for another purpose, subject to exceptions in the law and regulations (26 U.S.C. 7216).

Publication 4557 names steps worth asking about: multi-factor sign-in (a second step beyond the password) for anyone who reaches customer information, a separate login for each person, and access limited to people who need it. It also tells a preparer to choose outside providers that keep safeguards, so ask whether anyone outside the firm touches your files. The guide speaks to tax return preparers; a service that only keeps books is not named, so ask it the same questions. For access that cannot move money, see giving a bookkeeper access to your accounts.

Can the same firm handle an IRS notice or audit?

Generally only if the person who answers is allowed to represent you and holds your written authorization. A CPA, enrolled agent or attorney can handle any IRS matter. A preparer with limited rights cannot represent you on a return they did not prepare, or at appeals or collection (IRS credentials page).

• Form 2848 authorizes an individual eligible to practice before the IRS to represent you, and to inspect and receive your confidential tax information (IRS: About Form 2848). It must list each form and period; the IRS returns one that says "all years" (Instructions for Form 2848). Form 8821 only lets the person you name inspect or receive that information, and does not let a preparer without representation rights represent you (IRS: About Form 8821; Instructions for Form 2848). A partnership under the centralized audit regime names a partnership representative on its return; check who is named.
• On Forms 1065 and 1120-S, the "Yes" box next to the preparer's signature lets the IRS call the individual who signed with processing questions. That person may also give the IRS missing information, call the IRS about processing, and respond to certain notices about math errors and return preparation. It does not let that person bind the business or otherwise represent it before the IRS. It covers only that individual, not the firm, and ends no later than the due date, without extensions, of the following year's return (Form 1065 instructions; Form 1120-S instructions).
• See notices yourself. A partnership, S corporation or C corporation can open a Business Tax Account that shows IRS notices and letters, but full access goes to a Designated Official: a general partner or managing member of a partnership, an officer or managing member who is a current W-2 employee of a corporation. A sole proprietor with an employer identification number can open one too. A single-member LLC cannot yet get full access, whether it files as a sole proprietor or on Form 1120-S or 1065 (IRS: Business Tax Account).

A federal Form 2848 covers the IRS only; state notices come from state agencies, so ask whether the service answers those, and whether it answers a notice about a return it did not prepare. If a notice has already come, see IRS notice to your business; for an examination, see IRS audit of a small business. To end an old authorization, see taking over books from a former accountant.

How do I test a bundle before I sign?

Put the same written questions to every service you compare, and compare the answers line by line. Two red flags come straight from IRS guidance: a preparer who will not sign or give a PTIN, and a refund sent to an account that is not yours (IRS: preparer misconduct). Also ask how the fee is set. Circular 230 limits contingent fees, including a fee based on a percentage of the refund, for practitioners (31 CFR 10.27); whether it applies depends on who prepares the return and the work done. Then:

1. Get the scope in writing. Forms, states, payroll deposits, catch-up, corrections, notice response, and what costs extra. See bookkeeping engagement letter.
2. Get the signer's name, credential and PTIN. Ask when the Form 2848 is signed: at the start, or only after a notice arrives.
3. Ask for a sample month. Bank and card reconciliations, an income statement, a balance sheet and a list of open questions. See what a monthly bookkeeping service includes.
4. Test the exit. Read how long your data stays available, how records are returned and any fee for them. In the first month, ask for a backup of the accounting file and confirm you hold administrator rights.
5. Set up payroll oversight. Get your own IRS payment-system access before the first payroll.
6. Approve each return before it is filed. Never sign a blank or incomplete return (IRS: preparer misconduct).

For interview questions and red flags, see questions to ask before hiring a bookkeeper; for what each option costs, see bookkeeping cost per month.

Which businesses outgrow a bundle?

Re-check a fixed-scope bundle when the business adds any of these.

When a row applies, ask the service to name the filing in writing, or move that work to a firm that does. Either way, name who owns the year-end tie from the books to the return: see books to the business tax return.

Example

These examples are illustrative. All amounts are US dollars.

A consultant with a monthly bundle

A single-member LLC consulting practice in Texas, taxed as a sole proprietorship, pays a bundle US$125 a month (US$1,500 a year) for books and a federal return. One client is in California. Before renewing, the owner asks in writing: who signs the Schedule C, and with what credential? Is any state return in the fee, and is a California filing extra if California asks for one? Who answers an IRS letter about a return the service prepared? Whether California requires a return is California's rule. Whether the bundle prepares it is the contract's.

An S corporation with a missed deposit

An S corporation has two employees, and the service's payroll tool misses a US$4,000 federal deposit. It reaches the IRS 10 days late, which falls in the 5% tier: US$200, plus interest, unless the IRS accepts a reasonable-cause explanation. The IRS bills the corporation at its address of record, not the service: in this example the service is a payroll provider filing under the corporation's own EIN, not the employer. The owner never set up IRS payment-system access, so the miss surfaced only when the notice arrived. Had the deposit never been made, a responsible person who acted willfully could also face a personal penalty on the withheld tax.

A service that shuts down

An online service closes in March. The owner has 14 months of bank-feed books, no receipts and no copy of the accounting file. The owner checks whether the file sits under the owner's own login and whether administrator access can be reset, then exports a backup. Missing receipts are rebuilt from bank and card statements where the rules allow: see rebuilding books from bank statements.

Different for you?

• You already pay for a bundle, or a platform just closed, and the business has payroll, an S corporation or partnership return, several states, an IRS notice, or books you cannot reconcile. Each adds a filing, a liability or a record the scope may not name. A professional can compare the written scope with your returns, payroll reports and accounting file before anything moves: see bookkeeping help.
• The service closed or stopped answering. See taking over books from a former accountant and replacing your bookkeeper. If you decide to move books and returns to one provider, see bookkeeping help.
• An IRS notice arrived. See IRS notice to your business, and bookkeeping help if it involves a return or deposit the service handled. For penalties a mistake caused, see bookkeeper mistakes: who pays the penalties.
• The books are behind or messy. See catching up on overdue books and bookkeeping help.
• The business has a foreign owner. A foreign-owned US company can have information returns, such as Form 5472, that a flat-fee scope may not name (IRS: Instructions for Form 5472). See filing a corporate return from abroad and bookkeeping help.
• You are weighing doing it yourself, or a local bookkeeper. See doing your own books or hiring a bookkeeper and local or online bookkeeper.