As a small business owner, weighing the benefits of turning to a professional tax preparer versus preparing your own tax returns can be challenging.
We consulted with several tax professionals to recommend when to hire a preparer and how to choose a great one. Stay tuned for the next part of our article breaking down general tips and best practices from tax experts.
When to hire a professional
“For a small business owner, working with a tax professional can always be a good solution to ease stress and make sure you’re not setting yourself up for trouble with the IRS,” says Jayson Mullin, the founder of Top Tax Defenders, a tax resolution firm specializing in clients’ IRS tax problems.
“If your business is new and simple, you may be able to file using online services, but as the business grows and the laws become more complicated a tax professional will be able to navigate the codes and earn you the deductions you qualify for.” “Most small business owners could likely do a competent job at doing their own taxes, but it would consume a lot of time and energy better spent elsewhere,” agrees Wendy Connick of Connick Financial Solutions, a firm specializing in small business tax planning and preparation. “And small business owners likely aren’t tax experts, so they won’t know all the tricks for minimizing their tax bills.
If a professional tax preparer finds even one extra deduction or credit (just to give a simple example), it will likely more than pay for the tax preparer’s fees – especially since tax prep fees are deductible.” Josh Zimmelman, the owner of Westwood Tax & Consulting, a tax and consulting firm, adds that if you’re not very organized or computer savvy, or if you’ve made a lot of recent business changes, it’s probably best to hire a professional. The same goes for those who don’t understand tax laws that well.
“The IRS is constantly updating its laws regarding taxes, deductions, credits, etc. Some of it is pretty straightforward but certain tax forms can be more complicated and confusing. If you’re not sure what you’re doing, then you need a professional to offer guidance.”
When to prepare your own return
You should consider doing your own taxes if you have a simple tax return. “The benefits of using a tax professional are very little if you have a straightforward, simple return without a lot of deductions or complexities,” comments Randall Brody, owner and founder of TaxSamaritan, a tax and wealth management firm. “But that is often not the case for a small business owner that has a tax situation that is more complex than the typical taxpayer.
” Jacob Dayan, the partner, and co-founder of Community Tax, a full-service tax company, says that while hiring a tax preparer has its benefits, it’s important to vet the person you choose. “There are plenty of wet-behind-the-ears people at large tax prep firms, so don’t think that because you’re hiring help you’re getting a true expert. Also, there are plenty of risks with aggressive tax preparers (not accountants) who promise hefty refunds.
So there are good reasons to be careful when you shop for help.” “That said,” he continues, “the decision to ask for professional help is really about opportunity cost. As the saying goes, don’t step over a dollar to pick up a dime. Not only can the right professional save you a lot of money in expenses and deductions, but getting help can allow you to remain focused on running your own business during tax season.”
How to pick a tax preparer
Randall Brody discusses how to pick a tax preparer who is knowledgeable, accountable, and professional:
- “If you can’t afford to hire a tax professional, online tax software such as Turbo Tax and Tax are user-friendly and a good option when you can’t afford the best.
- Check the credentials of the tax preparer. All tax preparers, whether an Enrolled Agent, CPA or un-enrolled preparer must be registered with the IRS. The Internal Revenue Service (IRS) requires all paid tax preparers to have a Preparer Tax Identification Number (PTIN), so make sure your tax preparer has one and enters it on your return. IRS credentials can be checked at http://irs.treasury.gov/rpo/
- Check the reputation of the Professional Tax Service with the Better Business Bureau, State Boards of Accountancy (if a CPA), and other resources.
- Interview/talk to the preparer before deciding to hire them – based on your conversations with the tax professional, do you feel comfortable and confident, do they seem attentive and responsive to your questions (definitely ask questions to test their knowledge and about their service); returning your calls or responding to your email quickly before you even decide to hire them is a good sign.
- Hire a credentialed preparer. I recommend Enrolled Agents (an EA) as they are America’s Tax Experts and the only credentialed preparer that specializes in strictly income taxes.”
Thanks to Jayson Mullin, Wendy Connick, Jacob Dayan, Josh Zimmelman, and Randall Brody for their contributions.
9 thoughts on “Tips on When to Hire a Professional to Do Your Taxes”
I like that you said that we should speak with the professional before deciding to choose them. It might be a good idea to learn about the person that you are thinking about hiring. Getting reviews might be a good idea if you are unsure about where to start.
Hi John, thanks for stopping by our article. Yes, looking over reviews is always a good rule of thumb when searching for a reliable and professional tax preparer.
I think the article makes a good point about when to hire a professional to do your taxes. It mentioned that hiring a tax professional can help ease the stress associated with filing taxes, and it can protect you from getting in trouble with the IRS. Would referrals be a good way to find a professional tax preparer? I think having someone recommended to be would help solidify my decision.
Hi John, thanks for taking the time to read our article and leave us a comment! We’re glad you found it informative. Seeking referrals from fellow businesses can be very helpful in finding a professional tax preparer with a track record for excellence.
I like the recommendation to simply check the credentials of a tax preparer. It makes sense that it would be helpful to check all the credentials of the expert because you could get an idea of their knowledge and experience. It’s something to remember because an effective tax expert could be very helpful to anyone like me who doesn’t know a lot about finances.
Hi Tyler, we agree, it’s a tip that’s basic but essential.Thanks for commenting! Glad to know you found the article useful.
I like that you recommend to ask questions that test their knowledge. You might want to look to research a list of questions that you could ask if you aren’t sure what questions are appropriate. Up until now I have been able to use computer programs to help me with my taxes. However, now that my wife and I have gotten married and moved into a new house, it is a little more complicated. I’ll have to talk to her about hiring someone to help us do our taxes this year.
Thanks Scott, that’s a great suggestion. We may write an article just like that! Stay tuned.
Thank you for reminding me that it will be better for me to hire an accountant in case my business grows and we have to comply with more complicated laws. As a young entrepreneur, I’m also dreaming of growing my small business into something bigger in the future. It might be a good idea to invest in an accountant as early as now to ensure that we are taking the right path to financial success.
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