One of the best investments that you can make in your business is to hire an efficient tax preparer. I hire an excellent one when I have to file taxes for my small company. It allows me to go to bed with a clear conscience.
Can I File Taxes Myself?
No, you cannot do it on your own. I know what I am talking about. The first time I had to file taxes for my company I thought that it would be a piece of cake. I drew an absurd parallel: if I already knew how to file my personal taxes, I could also file my company’s ones. Big mistake.
Another common mistake is to think “my company is small and I will not have to file this”. In the case of tax laws, do not trust your intuition. Depending on the structure of your company, filing taxes is necessary and mandatory.
As for me, I did not file annual tax returns for my company on time. As a result, I had to pay a penalty of almost $1,000. If I had hired a tax preparer to file taxes for my company to ensure no errors, it would have been quite cheaper. And it would have probably taken the tax preparer fewer hours than it took me. Well, actually, it took me two days… and you can see the result. To learn more about late filing, you can read what happens if you file taxes late.
Why Should You Choose a Tax Preparer?
A tax preparer is not a robot that fills in forms. The tax preparer must be someone who knows your field of activity thoroughly since the business of a freelancer is not the same as that of a small family-owned company or a company with employees.
Furthermore, if at any point you are audited by the IRS, you will want to have a good tax preparer to stand up for the taxes filed. And that if you were one of the “lucky” ones who were randomly selected for an audit. If you are audited because of inconsistencies in your tax filings, the more reason to hire a tax expert. Here are 10 useful tips to avoid an audit.
13 Tips to Find the Most Suitable Tax Preparer for Your Business
1. Ask someone you trust to recommend a tax preparer. The best person to make a recommendation is a satisfied client.
2. Make sure that the professional you choose has a Preparer Tax Identification Number (PTIN).
3. Don’t be afraid of sharing your data with your tax preparer. They are professionals and they maintain the confidentiality of your tax information. If they do not, they will have to pay very high penalties.
4. Bear in mind that, on the one hand, there are three types of professionals with unlimited representation rights before the IRS.
- Enrolled Agents (licensed by the IRS)
- Certified Public Accountants
5. On the other hand, there are two types of professionals with limited representation rights:
- Annual Filing Season Program Participants.
- It is a voluntary program that recognizes the efforts of tax preparers who are not attorneys, certified public accounts or enrolled agents.
- The IRS issues a Record of Completion of the Annual Filing Season Program for these tax preparers who have met the requirements by obtaining a certain amount of hours of continuing education for a specific fiscal year.
- PTIN Again, make sure that the professional that you choose has a Preparer Tax Identification Number.
- They are only authorized to file taxes. Beginning January 1st, 2016, this is the only authority they have.
- They have no authority to represent clients before the IRS (except regarding returns they prepared and filed December 31st, 2015, and prior).
Both types of professionals may only represent clients whose returns they prepared and signed, but only before revenue agents, customer service representatives, and similar IRS employees, including the Taxpayer Advocate Service.
6. The tax preparer must be used to dealing with the IRS.
7. Would you like to check the credentials of the tax preparer of your choice? Go to the Directory of Federal Tax Return Preparers with Credentials and Select Qualifications.
8. Be very specific when you ask about their fees. Extra services are usually more expensive than standard fees.
9. Make sure that the tax preparer will also file your taxes electronically. It is more convenient when it comes to making payments and receiving refunds.
10. Be ready to answer a lot of questions. A good tax preparer will make them. Remember that your tax preparer must have in-depth knowledge of your business activity to render a good service.
11. Your tax preparer must have excellent document management skills. He or she must know how to keep the flow of invoices, receipts, etc. of your business in order. Also, he or she must send you copies of your tax returns.
12. Although in a perfect word you should be able to trust a professional, there are swindlers in all fields. If you have bad luck and suspect that your tax preparer may be committing fraud, file a complaint before the IRS. If you do not know how to do it, here you can find an explanation.
13. Would you like to know which tax preparers there are in your area? The IRS provides you with a directory where you can find the closest one.
All This Sounds Good, But… How Much Will It Cost?
Whatever the method of filing taxes you choose (with software, through an office or with a public accountant), here you can find information to have an idea about the cost depending on your choice.
My recommendation is to hire the best tax preparer that you can afford. It is a key investment. Using tax management software is not easy at first. You will probably learn a lot by watching your tax preparer work and you will be able to do it yourself as time goes by.
However, if you are just starting your own business, the time you need to learn how to file taxes is the time you need to run your business to make money. Your mission as a business owner is to make your company flourish and delegate tasks such as filing taxes to real professionals.
What Are the Advantages of Hiring a Tax Preparer over Filing Taxes Myself?
- IRS audits are a serious matter, particularly if it is not a random audit and they have identified mistakes in your return. With a tax preparer, you will reduce the possibility of receiving that dreaded call from the IRS.
- You will save time. And time is money. If you want to file taxes as fast and as good as a tax preparer does, you will have to devote yourself to this task for years. You do not have that kind of time, unless you want to become a tax preparer, of course.
- The tax preparer is a systemic thinker. The tax preparer thinks about the whole system of your company and makes difficult decisions.
- The tax preparer is an ally of your company’s growth. You need his or her knowledge to make your company thrive.
As you can see, a tax preparer will add value to your company by helping you deal with complex problems related to your business activity and by making tax decisions based on objective data. The tax preparer will have a big influence on your business, so my last tip is: take your time to choose the right candidate.
Whatever you decide, I hope I helped you realize how important it is to choose a good tax preparer. Now it is your turn to find one!