How to Choose the Right Tax Preparer or Tax Advisor for Your Business

Small business owners typically outsource many services that would otherwise be done in-house at larger companies, such as marketing, advertising, and accounting. But how can you ensure you're choosing the right professional to listen to your needs and provide trustworthy expertise? Some services are lower risk. After all, if you choose the wrong cleaning company for your store, it's easy to find an alternative quickly. However, other services like tax preparation are much more risky if you choose the wrong person. 

It can be challenging to find the right professional, but we'll guide you through some tips on how to choose a tax preparer for your small business. Choosing a tax preparer is more than simply looking at the cheapest fees. Finding a professional who genuinely has your best interests in mind and can guide you through maximizing your tax benefits is essential. If you need help determining where to begin and what to look for, read on to learn how to find a tax preparer.

Finding a good tax preparer in 8 steps

1. Define your business needs

Tax preparation for small businesses can quickly become overwhelming, depending on the situation. One important thing to note is the difference between tax advisors and tax preparers. A certified public accountant (CPA) would fall under the category of tax advisor. These individuals hold a minimum of a bachelor's degree and are experts in taxes, litigation services, audits, etc. A tax preparer holds an IRS Preparer Tax Identification Number (PTIN), although they may or may not have a degree in higher education.

Some small businesses may have complex needs to help with issues like sorting out business debt or converting from an LLC to a C corp. Even payroll can be confusing when you factor in paying your employees that might be freelance or independent contractors. A small business tax advisor would be ideal to assist with these situations. 

If your business is more straightforward without employees, a licensed tax preparer can still be a great asset to help you file the necessary tax documents. Remember that tax preparers may not represent you if you receive an IRS audit.

2. Ask for referrals

Another suggestion on how to find a tax advisor is to reach out to your network. It's always good to ask for references, assuming your network contains people you know and trust. You may know another small business owner with the same complex business need and successfully resolved it with a tax advisor. 

When you request a referral, you'll get a first-hand account of that individual's reputation. You'll focus on positive experiences but don't forget about the negative ones. People in your network may be eager to share about tax advisors who need to be more professional or knowledgeable. Consider all feedback so you'll better understand how to choose a good tax preparer. 

3. Check their background

Personal referrals are essential but remember to research when choosing a tax preparer. Experiences can vary, and it helps to look at outside reviews through the Better Business Bureau or another review site that you trust. As you check online reviews, you may discover several previous clients have similar complaints. Even if the reviews are generally positive, you might learn some helpful tips from others that have worked with this one tax professional. 

4. Verify qualifications and credentials

A critical step in how to find a good tax preparer is remembering to verify the individual’s identity and qualifications. At a minimum, your tax preparer should have a PTIN, which can be verified through the IRS directory. The specific qualifications and credentials will differ depending on the services you need. Here are a few other identifying features you may want to verify:

• CPA license for accountants
• Enrolled agent license for tax preparers
• Bar license for attorneys

5. Compare fees

Like any other service or product, you'll want to compare the different fees when searching for a tax advisor. Some tax professionals may charge for individual services, while others are more inclusive with their pricing. A tax advisor might even discuss additional services you had yet to consider during your initial research, such as bookkeeping or payroll. Although you're probably looking to save money, don't let cost be the deciding factor. When you're trusting someone to prepare and file your small business tax return, you generally don't want to have the viewpoint that "cheaper is better."

6. Know how to spot red flags

Understanding how to choose a good tax professional can be challenging, especially if this is your first experience. There are many details to consider, and you're probably under pressure to find someone quickly. However, rushing through the process is never a good idea, and you'll risk overlooking potential red flags. Here are just a few items that might indicate a low-quality tax professional:

• Poor communication: If emails and phone calls are left unanswered, that's a sign that this tax advisor doesn't have your best interests in mind or is too busy with other duties to give you the attention you deserve.
• Unrealistic expectations: A good tax advisor will be realistic in providing tax estimates and timelines. If someone is making promises about speedy work and high tax refunds, you may look elsewhere for someone more realistic.
• Unethical fees: Tax advisors will charge a flat or hourly fee for their services. An advisor who estimates your return and calculates their fee is a huge red flag. 
• Withholding a signature: Confirm that your tax advisor will sign your tax return first. All returns must be signed before filing, so it's generally a good sign if the advisor is willing to put his name on it.

7. Ensure they offer e-filing

Filing an electronic tax return is a convenient and safe option for small businesses. Not only is it filed immediately, but you can have peace of mind with the electronic confirmation. Tax preparers who complete ten or more returns must offer e-filing for their clients. 

8. Review their year-round accessibility 

Tax season for the individual taxpayer is in April, but small business taxes are a year-round activity. Small business owners have more tax responsibilities, such as quarterly estimated taxes. When deciding how to choose a tax advisor, ask about their availability post-tax season. You'll want to make sure that your advisor is available to answer questions throughout the year and can guide you on best practices to ensure you can maximize your refund.

FAQs

Is a CPA better than a tax preparer?

CPAs and tax preparers are qualified to file small business taxes, although a CPA has the experience needed to advise on auditing, entity conversion, and more. A tax preparer might be acceptable if you have minimum needs for your tax return, but anything beyond a simple return is best left with a CPA.

Is it worth hiring a tax preparer?

A qualified tax preparer can be an excellent investment for any small business owner who wants to ensure that taxes are filed correctly. As your business grows and evolves, it helps to have a tax professional on your side who can advise you on best practices.

What are the cons of a professional tax preparer?

Often, hiring a tax preparer comes with peace of mind, but there's also a monetary cost that some small business owners might not want. Choosing a tax preparer is a big decision, and you should make sure you're investing wisely.

Do tax preparers get you more money?

Tax preparers can help determine how to maximize your deductions and credits best, which can result in a larger refund. However, it would help if you were cautious against any tax preparer who promises a lot of money.

Work with experts for all of your business tax needs

Choosing a good tax preparer is an important task that helps set up your small business for success. Your financial health is critical to your business's longevity, so you'll want to make sure that you find a worthy professional who can help you stay on track with your taxes. At 1-800Accountant, we have a team of knowledgeable CPAs and tax professionals who can help save you money and provide continued tax support throughout the year.