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Small Business Taxation: How to Hire a Professional Tax Preparer?

Regardless of the business size, proper financial accounting brings superior financial management, where tax is a broad, unavoidable element in all transactions. Businesses have different requirements, sizes, and organizational structures, depending on which you might also be handling your business taxes your way. Usually, with a limited budget and staff, small business owners prepare tax files themselves, get it done from accountants, or have a professional to manage all tax and compliance obligations.

A considerable portion of taxes collected by the IRS comes from small businesses, of which 53% of businesses run with less than ten people, while 37% are one-person businesses. 

Every business has its own approach to filing tax returns based on a lot of factors. But, high levels of complications involved and frequent changes in tax laws make tax preparation a tedious and responsible job, for which, you being a small business owner might want to get experts’ advice rather than doing it yourself and taking an audit risk (unless you have a good knowledge of taxes). 

There are Primarily Three Types of Tax Advisers

1. Enrolled Agent (EA)

An enrolled agent is a tax professional licensed by the IRS after the candidate passes a test or completes a minimum of five years working for the IRS. EAs offer inexpensive tax preparation services and often assist with bookkeeping and accounting.

2. Certified Public Accountants (CPA) and other Accountants 

CPAs are licensed and regulated by the specific state they practice within. They manage accounting, business taxation, and prepare tax returns. Businesses with complicated tax returns generally require CPAs. However, a small CPA firm would be suitable for a small business tax return preparation.

3. Tax Attorney

Tax attorneys are lawyers holding a specialized tax law degree named L.L.M in taxation or a tax specialization certificate provided by a state bar association. You need a tax attorney only when you get a tax problem, an audit by the IRS, and need legal representation in court.

Although the tax is a confusing topic as it can give a headache to business owners on a good day too, many owners prepare their tax files themselves, let’s read how it is different from having an expert.

Doing Business Taxes Yourself

Business tax preparation can be complicated, where the level of complexity widely depends upon the complexity of the business. If you have many depreciating assets or deductions that you know you qualify for, it might get challenging to prepare tax files efficiently within the due date. Besides, you need to be aware of estimated tax returns and taxes a business requires to pay throughout the year, such as quarterly sales taxes.

For streamlined tax filing, you need to maintain records of your income and expenses each month so that you will have all the essentially-required information easily accessible when you need them for tax purposes. However, this steals a lot of your time that being the business owner can invest in marketing and business growth.

You must also stay current with changes in tax laws, especially when you are planning to change your tax strategy. As it is vital to file a correct tax return, preparing business tax files on your own requires you to have a background in taxes and ensure you have a fair understanding of your business, its nature, and the tax rules it must comply with. Otherwise, you may face an audit and/or costly penalties by the IRS.

Having an Expert for Business Tax Preparation

If you go further than the DIY approach for business tax filing, you will find several options you can choose from your business requirements and budget. For instance, you can invest in tax software and have a CPA to use it efficiently. Another option is to hire a tax professional on a temporary/contractual basis or outsource tax preparation services to a renowned, certified company offering affordable business tax solutions.

You must understand the difference here; when you do your own taxes and get stuck somewhere, there is no one to help you. On the other hand, you have an expert who takes the tax filing burden off your shoulders and can assist you with tax planning and other business-tax areas you might not be aware of.

Whatever type of tax professional your business hires, you need to make sure they have specific knowledge and experience in providing services to your kind of business or industry.

How Do Tax Professionals Help Your Business?

Once you find a suitable tax professional for your business, you get their assistance in many ways at different times of the year.

Expert Advice: Tax professionals are filled with information on taxation, and they can advise you on several business tax matters, helping you make effective tax decisions.

Records Management: Taxation requires almost all records of your business; hence, you will need to gather and organize a lot of files and documents. Here, a tax professional can help you set up a records management system that is tailored to your business.

Leverage Tax Tech: Some firms can help you utilize the latest tax software. If you already have a subscription but unable to use it to maximum advantage, a trusted tax preparation firm can help. They can handle your financial records online using software, and prepare accurate, organized tax files ready to be submitted.

Tax Deductions: The tax professional can also point out deductions that you or software might have missed, along with highlighting troublesome red flags.

The IRS Audit: If you get into trouble as the IRS comes to your office for an audit, you will have a tax expert, standing by your side, having your back in this tough time.

Court Representation: An EA, CPA, or tax attorney can represent you in the court before the IRS. You can trust your hired tax professional as they are generally equipped with knowledge about detailed tax norms, and tactics to handle the IRS bureaucracy.

Since there are several advantages of hiring a tax professional that saves your time and money, hiring one for your business seems smart. Find a reliable, suitable tax expert, and fulfill your small business tax preparation requirements.

Choosing the Right Tax Professional for Your Business

Personal Contacts: Call your friends, family, clients, personal banker, associates, and ask for recommendations/referrals; this is an old and effective method of finding a reliable resource.

Advertising: Post ads about your requirement in local newspapers; besides, you can post ads on social media and other websites that most job seekers frequently use.

Whether you find a full-time, part-time skilled tax professional or choose to outsource tax preparation services to a certified, reliable firm, you need to ensure they fit in with your business. 

Ask as many questions you have in mind: their qualification, total experience, and how they managed to tackle challenging business tax issues, audits, etc. While choosing a firm, ask them about their service delivery process, data security measures, project fulfillment terms, etc. There will be some questions that you also need to ask yourself; how much can you spend on having a tax professional on board, your business requirements for tax preparation, etc. It is advised that you don’t rush things and take your time in finding a suitable tax preparer for your business.

Adriene Raynott
Adriene Raynott is a Sr. Business Analyst at Cogneesol, since 2008. She is passionate about writing on finance and CPA accounting concepts, small business growth, entrepreneurship, retail/eCommerce, branding, tax preparation, etc. She is contributing her skills, knowledge, and experience to assist people pertaining to finance & accounting matters.

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