Small Business Tax Accountant: What to Look for Before You Hire
The selection of a tax accountant for a small business is not just about finding someone who will do your tax preparation. The ideal tax accountant will know your business operations inside out, help plan ahead before any tax deadline arrives, and be responsive to any concerns and offer helpful advice along the way. For a business that is expanding, tax issues have an impact on cash flow, hiring practices, buying equipment, business organization, owner’s remuneration, and future growth prospects. All this makes it critical to have a tax accountant as part of your team.
In this paper, you will find out which aspects need to be considered prior to choosing a tax accountant.
What does a Small Business Tax Accountant Do?
In addition to filing an annual return for a business, a small business tax accountant can perform many other tasks. According to the type of services offered by the business and requirements of your business, they can provide:
- Filing business tax returns
- Filing owner's tax returns where required
- Rechecking of financial records before filing the taxes
- Prediction of quarterly tax payments
- Assistance in finding eligible deductions and credits
- Tax planning before any big business decision
- Advice in relation to business structure and tax elections
- Help regarding federal and state taxes
- Dealing with any tax notices received
- Coordination with the bookkeeper or accountant of your company
- Assistance when there are any tax questions arising during the year
The services depend on the professional you choose and the scope of your work.
The IRS advises small businesses to ensure the qualifications of the tax professional, get information regarding fees prior to hiring, verify their year round availability and check the tax return prepared before signing it. (Internal Revenue Service)
Tax Preparation Is Not the Same as Tax Planning
This is possibly the most significant difference that needs to be understood in comparison of tax accountants.
Tax preparation focuses mostly on what transpired in the previous tax year.
Tax planning focuses on the future and what you can do before the end of the tax year or before any big deal is made.
For instance, if your company anticipates much higher earnings this year, a tax preparer may wait until tax season to raise the issue.
In a tax-planning situation, however, you might review your anticipated earnings, expenses, estimated taxes, capital equipment acquisitions, business changes, and many other things with your tax planner while there is still time to take proper action.
When asking tax professionals about themselves, you should ask:
“How do you help your clients plan for taxes prior to year-end?”
The answer will tell you whether or not you’re hiring someone to prepare your taxes once or for life.
7 Things to Look for in a Small Business Tax Accountant
1. Experience With Businesses Like Yours
The tax accountant doesn’t necessarily have to specialize in working in your industry, but having experience in other businesses like yours might be significant.
Find out if they normally work with businesses whose:
- Business structure
- Similar in size to your
- Earnings are of a certain type
- Have payroll system similar to yours
- Have contractor relationships like you
- File taxes in your state
- Have inventory or equipment
- Specific tax issues related to your industry
For instance, tax matters for construction companies are different from the matters of professional services companies and e-commerce companies.
A good question to ask in this case would be:
“What kinds of businesses similar to mine do you work with at the moment?”
What you are looking for is a response which demonstrates knowledge of your particular business model, not just a general discussion of tax services
2. Year-Round Tax Planning
When all you hear from your accountant is filing, you could be missing out on many opportunities to take some proactive measures.
An ideal tax accountant for small business must be able to discuss how they manage planning at various times of the year.
Based on your needs, it could involve any of the following:
- Looking into estimated taxes
- Scheduling for changes in income
- Scheduling for big purchases
- Scheduling for changes in the business
- Tax consequences of adding employees
- Tax elections and entity selection
- Financial data review before end-of-year
What you do not need is a tax accountant who will promise to save you a lot of money on taxes. Do not trust anyone who will promise you excessive refunds or deductions. As per the IRS, taxpayers must watch out for such tax return preparers. (Internal Revenue Service)
3. Strong Compliance Processes
Tax planning is very important but proper and timely filing is more important.
Inquire about which returns and filings are handled by the CPA and which are not.
Based on the nature of your business, these might include:
- Federal business returns
- State income tax returns
- Estimated tax payments
- Payroll tax returns
- Information returns
- Sales and use taxes
- Multi state return requirements
- Return preparation for owners
Not all CPAs handle all tax services, so do not make assumptions.
Request that you receive a written list of what is included, what is not included and what incurs additional charges.
4. Responsiveness Outside Tax Season
Tax matters are not settled once you file your return.
When do you need advice on:
- Purchasing business equipment
- Hiring someone to work for you
- Add a business partner
- Change your business form
- Conducting business in another state
- Get a tax notice
- Making a major business acquisition
- Expect a substantial increase or decrease in income?
The IRS suggests thinking about whether the preparer will be available for further contact after the return is completed. (Internal Revenue Service)
Ask when selecting a tax preparer:
“Who do you use for client communications during the year?”
It is also important to find out how you will contact the preparer. Are you going to have direct contact with the accountant, or will most of the communications be routed through a general customer service mailbox?
5. Clear Pricing and Scope
Price does matter, although a cheaper tax accountant doesn’t mean you will be spending less in the long term.
Two companies could have different quotes since they offer different services.
For example, one company could just do tax preparation while another could also do quarterly planning sessions, estimated tax calculations, business counseling, and notices.
Prior to signing any contract, it would be prudent for you to find out:
- What exactly is included in your fee?
- Are your state returns included?
- Are your owner returns included?
- Are estimated tax calculations included?
- Are tax planning meetings included?
- What happens when you need an amended return?
- How are IRS notices handled?
- How about state notices?
- Which of the services are not included?
- How are they priced?
This will help you avoid any conflicts later. It has been advised by the IRS that taxpayers get all these answers up front. (Internal Revenue Service)
When Credentials Should You Check?
Do not pick a tax professional just by his title.
Instead, inquire about his credentials, experience, and authorization to offer the services you require. Most paid tax return preparers must obtain an IRS Preparer Tax Identification Number (PTIN). There is also a directory of certain credential holders among tax professionals, maintained by the IRS. (Internal Revenue Service)
If the right to represent you in dealings with the IRS is crucial for your business, find out the extent of their representation authorization. For instance, the IRS says that CPAs, attorneys, and enrolled agents have unlimited representation authorization before the IRS, depending on rules in force. (Internal Revenue Service)
Do not hesitate to ask:
“What credentials do you hold and what types of tax business are you able to handle?”
How to Find a Tax Accountant Near Me for Small Business
When looking for a tax accountant near me for small business, there will be many options at your disposal, but their geographical proximity to you shouldn’t be the deciding factor. First, prepare a list of professionals that seem to work with similar businesses as yours.
Compare them based on the following criteria:
- 1. Business and industry experience
- 2. Tax planning assistance
- 3. Compliance support
- 4. Communication and response rate
- 5. Credentials
- 6. Services offered
- 7. Fee structure
- 8. Availability year-round
- 9. Experience with your type of business
- 10. Ability to work with your existing bookkeeper or accountant
There are several sources you could use for your search process: referrals, professional directories, and the IRS directory. (Internal Revenue Service)
The best local tax accountant is not always the one whose office is physically close to you. It is the one that understands your business and provides the kind of assistance you need.
Questions to Ask During Your First Tax Consultation
Before hiring anybody, use the consultation time to analyze the relationship not only the cost. These questions may be useful for you:
About experience:
- Do you deal with companies similar to ours?
- How well do you know our industry?
- Do you often work with our company structure?
About tax planning:
- Are year-round tax plans provided by you?
- How frequently are estimated taxes reviewed?
- When do you usually start your year-end tax plans?
About compliance
- What types of filings do you make at the federal and state levels?
- Do you make owner returns?
- What is your process for handling tax notices?
About communication
- Who is going to be my main point of contact?
- What is your response time?
- Can I reach you even during off season?
- How often do we meet?
About pricing
- What is covered by the quoted cost?
- Which services will be charged separately?
- Will I get an engagement agreement in writing?
These questions may uncover the distinctions among companies which may appear the same in cyberspace.
Red Flags to Watch For
One must be careful when the tax preparer:
- Promises a particular refund amount
- Charges according to the size of the refund
- Refuses to give an explanation of the fees involved
- Is unable to clarify the scope of the engagement
- Is hard to get in touch with before engaging with them
- Does not ask any questions about your business
- Is only interested in tax preparation
- Requests the client to sign a blank return
- Fails to give a copy of the completed return
- Mentions deductions that are hard to understand
According to the IRS, one should be wary of preparers who offer unusually high refunds, charge according to the refund, ask their clients to sign blank returns, and fail to give a signed copy of the return. (Internal Revenue Service)
Tax Accountant vs. Bookkeeper: Do You Need Both?
However, a bookkeeper and a tax accountant do not share the same responsibility. While the bookkeeper concentrates his work on documentation, reconciliation, and record keeping, a tax accountant works with the financial documents provided by the bookkeeper for the purposes of tax preparation.
It is quite possible that you need both professionals.
Moreover, having your records in order makes it easier for the tax accountant to prepare your taxes. Before hiring a tax accountant, make sure that he will be able to use your bookkeeping system or even collaborate with your bookkeeper.
When Should You Hire a Small Business Tax Accountant?
There is no need for you to wait for your business to grow into a big one.
Think about getting help from professionals in tax issues if:
- Your tax form has become complex.
- You have employees or contractors in your business.
- Your business operates in several states.
- You had some changes in your income/expenses.
- You are not sure how to pay estimated taxes.
- You think of changing the organizational form of your business.
- You will buy some significant assets for your business.
- You are going to sell or purchase another business.
- You would like to do not only tax preparation but tax planning as well.
- You spend too much time thinking about your taxes on your own.
The proper timing for recruitment may be before a financial decision rather than after making the financial decision.
A Simple Checklist Before You Hire
Use this checklist when comparing your options:
- What to Check What You Should Know
- Business experience Do they understand businesses like yours?
- Credentials Are their qualifications appropriate for your needs?
- Tax planning Do they provide advice before filing season?
- Compliance Which returns and filings are included?
- Communication How and when can you reach them?
- Pricing Do you understand the full cost and scope?
- Year-round support Will they be available after tax season?
- Tax notices Who helps if you receive an IRS or state notice?
- Existing team Can they work with your bookkeeper or accountant?
- Business understanding Do they ask questions about how your company operates?
With a positive response to these questions from a business, you will be in a much better position to compare it against others
The Right Tax Accountant Should Know More Than Your Tax Return
The best small business tax accountant should know that the filing of your tax forms is just one component of your business finances.
This person needs to be able to do an efficient job of filing your taxes, keep you updated about your tax responsibilities, answer any questions that you might have, and give you advice regarding tax issues when making major decisions in your business.
Price and location shouldn’t be the main reasons you hire your accountant.
- What to Check What You Should Know
- Business experience Do they understand businesses like yours?
- Credentials Are their qualifications appropriate for your needs?
- Tax planning Do they provide advice before filing season?
- Compliance Which returns and filings are included?
- Communication How and when can you reach them?
- Pricing Do you understand the full cost and scope?
- Year-round support Will they be available after tax season?
- Tax notices Who helps if you receive an IRS or state notice?
- Existing team Can they work with your bookkeeper or accountant?
- Business understanding Do they ask questions about how your company operates?
With a positive response to these questions from a business, you will be in a much better position to compare it against others
Schedule a Tax Consultation
If you want something more than filing your taxes, CBA Financials will assist you in assessing your company’s tax needs and in finding out which type of tax assistance would be beneficial for your organization.
Contact us for a consultation regarding your company and tax needs.
