What You Need to Know Before Hiring a Tax Professional for Your Small Business

March 25, 2022
Woman looking at spreadsheets for hiring a tax professional

When hiring a tax professional, small business professionals have a lot on their plates. Between managing a team, marketing their products and services, and staying on top of industry trends, there are a lot of responsibilities to juggle. However, one area of work that small business owners would benefit from outsourcing is accounting. 

Tax professionals have certifications that will allow your business to adhere to tax laws, state and federal regulations, and industry-specific rules. Before hiring a tax professional, you’ll need to know which kind of tax professional to hire. You’ll also want to look for certain qualities to make your experience easier. Here’s what you need to know before hiring a tax professional for your small business.

Why Your Small Business Needs a Tax Professional

A tax professional for small businesses can help small business owners comply with IRS regulations and rules and ensure taxes are paid on time. By working with tax professionals, your small business will:

  • Have assistance in case of a tax audit. 
  • Save money depending on the tax professional’s fee structure.
  • Work with someone experienced in taxes and who is up to date with tax regulations.
  • Work with someone who has credentials from the IRS.

What Are the Different Kinds of Tax Professionals?

There are five different kinds of tax professionals arranged in two categories of representation rights: unlimited representation rights and limited representation rights. 

Tax professionals with unlimited representation rights can represent clients on any tax issue, such as appeals, audits, collection issues, and payment issues. Those with unlimited representation rights are:

  • Attorneys 
  • Certified public accountants 
  • Enrolled agents 

There are also tax professionals with limited representation rights. These tax professionals are also qualified to represent clients, but they don’t have the same credentials as those with unlimited representation rights. Those with limited representation rights:

  • Can only represent clients whose returns they prepared and signed. 
  • Can’t represent clients whose returns they didn’t prepare. 
  • Can’t represent clients regarding appeals or collection issues, even if they prepared the tax return.

Tax professionals with limited representation rights are Annual Filing Season Program participants and PTIN holders.

What Is an Enrolled Agent?

An enrolled agent is a person who represents taxpayers before the IRS. The IRS licenses enrolled agents, and there are requirements enrolled agents must meet. They must pass an examination and complete 72 hours of continuing education every three years.

Enrolled agents can represent any taxpayer for any tax matter and represent the taxpayer at any IRS office.

What Is a Certified Public Accountant?

A certified public accountant, or a CPA, is an individual licensed by state boards of accountancy, the District of Columbia, and U.S. Territories. There are education, ethical, and examination requirements that certified public accountants will follow.

CPAs have education requirements in that the accountant must have studied accounting. A CPA must pass an examination and remain in ethical compliance with state boards of accountancy requirements. 

Like an enrolled agent, a CPA has continuing education requirements they must meet to remain in practice. A certified public accountant may offer different services, such as tax planning and tax preparation. 

What Can Hiring a Tax Professional Do for a Small Business?

A tax professional for small businesses does several things to make sure small businesses remain in compliance with their tax requirements.

Tax professionals can help you before, during, and after tax preparation to make sure your small business complies with the most current tax regulations.

Tax Planning

Tax professionals can help your small business with tax planning. You’ll receive advice and guidance to ensure you pay taxes and reduce your tax liability.

You may also discuss tax strategies, such as considerations for small business income, purchases, tax deductions, and tax credits that you might be eligible for.

It may be helpful to communicate with a tax professional for small businesses throughout the year; many small business owners opt for a quarterly check-in to ensure they’re on the right path with their yearly plan. This is also a great way to be kept abreast of any tax code changes that could affect your taxes.

Record Keeping

Tax professionals can also help small business owners with their record keeping. They’ll help small business clients determine which documents to keep on file and will also maintain documents according to IRS requirements.

Tax professionals must keep a copy of the client’s tax return and any supplemental information about their taxes. Tax professionals should keep the following documents on behalf of their clients:

  • Bank statements 
  • General ledgers
  • Receipts
  • Tax schedules
  • Tax work papers

Having a dedicated record keeper is an invaluable asset to small business owners as there are often a wide variety of documents that need to be filed, tracked, and then pulled out again for tax season.

Tax Preparation 

Third, a tax professional can also work with you for your small business tax preparation. They can see which tax credits and tax deductions your small business qualifies for, which can help you lower your tax bill.

Tax credits will help small business owners reduce the amount owed, or it can increase your tax refund. Sometimes, tax credits may result in a refund if you don’t owe taxes.

Tax deductions can reduce your taxable income by allowing you to choose from either an itemized deduction or a standard deduction.

Advice When Dealing with the IRS

The last way a tax professional can help a small business happens is if the IRS contacts you. After you file your tax return with the IRS, there’s a possibility that you may receive an audit. 

If that happens, a tax professional can serve as your representative and can even go with you to represent you during the audit process.

What to Look for When Hiring a Tax Professional

As a small business owner, there are two things to look for in a tax professional for a small business. Knowing what to look for in a tax professional may not only save money, but you’ll choose the best tax professional for your needs.

Prior to working with a tax professional for your business, you’ll want to search for certain qualities. Some ‌qualifications you’ll want to look for include:

  • A tax professional’s availability options
  • A tax professional’s history
  • A tax professional’s qualifications

Make Sure Their Fees Are Upfront and Transparent

The second thing to look for in a tax professional for small businesses is their fee structure. For the best results, you’ll want to know the fees you’ll pay beforehand.

Something to be aware of as you look for a tax professional is the transparency behind their fees. When searching for a tax professional, you should know the cost of services and what exactly you get with your fees. You’ll want to avoid tax professionals who charge fees based on your expected refund amount. 

Contact 1-800Accountant for Business Tax Advice and Preparation

Tax professionals are a vital resource for small business owners. As a small business owner, hiring a tax professional can ensure that you have the answers and representation you need — especially in the case of an audit.

When you need business tax advice and business tax preparation, work with the experts. Contact the tax professionals at 1-800Accountant for your small business tax advice and small business tax preparation.

This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. 1-800Accountant assumes no liability for actions taken in reliance upon the information contained herein.