When you’re preparing to launch your small business, it’s smart to come up with some solutions in advance. One of these features is the tax return.
When you’re at the beginning of your business quest, you might unintentionally leave out some important elements on your tax return. The tax authorities aren’t famous for being generous to business beginners. Therefore, it’s wise to establish a collaboration with a well-versed tax preparer. Here’s what details you should pay attention to while searching for your personal tax professional.
Ask about their qualifications
Until two years ago, anyone could start working as a tax preparer. From unemployed persons knowledgeable about this area to full-time accountants and financial advisers, the number of freelancing tax preparers would suddenly rise in January and drop in May. That’s the period when tax returns are prepared and handed in.
The IRS had been trying for years to introduce some legal requirements that would prevent fake tax professionals or genuine fraudsters to trick inexperienced businesspeople that way. Finally, in 2015 the Congress brought a set of legal measures that put some stricter competency regulations into practice.
First and foremost, the greatest advantage you can use nowadays as an SMB-owner in the USA is to find your tax preparer in the Directory of Federal Tax Return Preparers with Credentials. The business owners who don’t have any other sources should be able to find their preparer here.
Therefore, always inquire about the qualifications of the tax preparers you take into consideration. For starters, ask your candidates if they have the Preparer Tax Identification Number (PTIN). The IRS started issuing these numbers in 2011 and each licensed tax preparer has to renew it every year.
Apart from that, the IRS is encouraging unregistered tax preparers to start attending their Annual Filing Season Program. So, if you’ve used the services of the same unregistered preparer for years, suggest that they pass this course.
The end goal of all these new rules is to improve the level of security of tax-paying small businesses, as well as to increase the number of properly filled tax returns. It will result in a higher number of paid taxes.
Inquire about the fees
When you’ve analyzed several tax-preparing providers, reduce their number to a few chosen ones. After that, it’s time to call each of them and ask about their fees. Additionally, you can send them emails, since that way you might get more comprehensive answers.
What you should first inquire about is whether they charge hourly rates or flat rates. In case your business has had a tremendous fiscal year, it could require a longer period of work on your tax return. Hence, hourly rates might not suit your budget.
As opposed to that, small businesses with low-profit margins might find that option perfect for their financial situation.
A rule of thumb is that the entrepreneurs who are turning in itemized tax returns pay more than the ones who file plain returns without deductions. According to the tax-related post published by American Express, the former might pay up to $273 per return, while the rates for the latter start from $173. The same source claims that a business turning in a Schedule C, together with an itemized return, might pay as much as $457 per return.
As you can see, by paying a reasonable amount of money to a tax pro, you’ll remove the risk of making a mistake by filing your tax return on your own.
Also, you can form a special saving fund and put some money aside throughout the year, to prepare the budget for the taxation season.
Certified public accountants or registered tax preparers?
A certified public accountant (CPA) is an accounting professional who has passed the chamber exams and is licensed to perform any accounting operations for businesses.
While it’s highly likely that you’ll need this type of professional at the beginning of your small-business career, not all CPAs work as tax preparers. For instance, you’ll hire a CPA in case you need a professional to help you deal with the IRS in case of appeal or issues with audits, payments or tax collections. Also, these professionals are a perfect fit for entrepreneurs-to-be or those who are getting ready to close down a business, as accounting advisers for their needs.
As for the tax preparation, it’s clever to first ask them about their previous experience with these forms.
If you’ve had a CPA by your side since the moment you started your business, it’s logical to first turn to them in search for a tax preparer. Even if that’s not their kettle of fish, they might give you a reliable reference for tax preparers.
Think about enrolled agents
Enrolled agents are tax preparers who have passed an IRS exam covering various aspects of taxes, from company and individual tax returns to tax planning.
The most interesting thing about enrolled agents is that they usually concentrate on one tax field and specialize it for their professional work. So, make sure that you find the one that is proficient in the type of taxes you need on your tax return.
The easiest way to find them is to search the database of the National Association of Enrolled Agents. On the one hand, you won’t waste your time looking for the right tax preparer in other sources. On the other, you can easily spot an enrolled agent in your geographical area. This is a great advantage, due to the fact that some tax regulations differentiate from state to state.
Tax attorneys for troubled businesses
If the IRS finds any irregularities in your tax return, they’ll report your business and file a suit against it. Some people would say that this is the right time to hire a tax attorney.
However, this might be just too late for such a move. As a matter of fact, it would be clever to consult a tax attorney before you’ve even set up your business. For instance, they can help you choose the right business structure, tax-wise.
What’s more, tax attorneys – as experts in tax law – can provide you with the information necessary to master international tax rules. This will be of great help for entrepreneurs working with foreign companies.
As for the references, check if your potential tax attorneys are members of the Federal Bar Association. That way, you’ll know that you have an experienced and licensed tax professional behind your back.
Conclusion
Finding a tax preparer for your small business is one of those fundamental business prerequisites. They’ll do their best to make your tax return impeccable and avoid any potential issues with the IRS. What’s more, keeping a tax preparer by your side before and after the tax season, as well, will help you run your business more efficiently and develop it in a successful way.
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