For any small business, tax time is both stressful and exciting. The business’ yearly tax return provides valuable insights into not only revenue but also expenses and annual growth. However, it should always be handled by a tax professional well-versed in details like current opportunities for tax credits, what expenses can be deducted, how the business must report employee taxation, and dozens of other requirements and rules a business owner doesn’t have the time, knowledge, or likely the energy to navigate. 

Selecting the right professional to handle this crucial task can be its own challenge. Below are several factors to consider when hiring a tax adviser (sometimes called a tax consultant). 

Find an IRS-Enrolled Agent

A good first qualification by which to judge a tax adviser is whether they’re an enrolled agent with the IRS. These professionals are great allies for any small business with complicated tax filing situations, like when it’s expected taxes will be owed, or when a business needs to file in multiple states. Tax experts must pass a rigorous qualification process to receive the IRS’s endorsement, including three Special Enrollment Examinations, one of which is specific to business taxes alone. After passing the tests and receiving their initial endorsement, IRS-enrolled agents must complete 16 hours per year of continuing education, two of which must be focused on ethics. 

By selecting an adviser who is IRS-enrolled, a business owner can be better assured the adviser is up to date on current IRS policies and requirements. You can find such an adviser through the National Association of Enrolled Agents.

CPA vs Enrolled Agent

It may be the case that your business’ certified personal accountant (CPA) is also the one who prepares your taxes. The question of whether this is appropriate depends on a number of factors. If you’ve grown a lot in the last year and need to formulate a plan for the coming months, or need a full audit of your business’ expenses, deductions, and income, a CPA might be a better choice than an enrolled agent, though you should still ensure the CPA is licensed in your state.

The benefit of hiring a CPA over someone who is billed simply an accountant is that CPAs are regulated by the state. They must have college degrees in accounting, gain professional experience in public accounting, and pass the Uniform CPA Examination. Many states do not require that individuals offering themselves for hire simply as an accountant possess any of this industry expertise. That doesn’t mean those individuals aren’t qualified, but it is a factor to be aware of.

Enrolled agents specialize solely in doing taxes, while a CPA’s range of service offerings is wider.  If you’re leaning toward hiring a CPA to prepare your taxes and more, you can find qualified professionals through the American Institute of CPAs

The CPA

Enrolled Agent

Business Situation

Business Situation

You’ve grown a lot in the last year and need to formulate a plan for the coming months

You have a complicated tax filing situation, like you expect to owe taxes or need to file in multiple states

You need a full audit of yoru business’ expenses, deductions, and income

 

Benefits

Benefits

CPAs are regulated by the state

They specialize solely in doing taxes

They have a fuller understanding of your business

You can be better assured the adviser is up to date on current IRS policies and requirements

Do Your Research

It’s important to get objective information about the tax adviser’s background, even if they’ve been recommended to you by a trusted peer in your industry. If you’re hiring a CPA, check them out through your state’s accounting board and public rating websites, such as Yelp, Google, or even Facebook, to confirm their credentials and their professionalism. An enrolled agent’s status with the IRS can be affirmed by submitting a request to their licensing office via email.  In the case that you learn vital information you didn’t know from this vetting process, you’ll be glad you took the time to do due diligence. 

Knowledge of Your Industry

Whether you’re choosing an enrolled agent or a CPA, it’s important they frequently represent businesses in your industry. A restaurant will have very different requirements for reporting wages and income than a construction company that hires independent contractors. If you offer stock options, you want to be sure the professional has served other businesses that do so. Other business owners in your industry can be an invaluable resource in seeking out a qualified professional of either type. Don’t hesitate to use your network to your advantage, but still do your due diligence. Interview more than one candidate in order to compare and contrast fees, services, and even personality to find the right fit for you. Ask targeted questions that will confirm they know your industry well. 

401(k) CPA

Year-Round Availability and Pro-Bono Guarantee

If the tax adviser isn’t available to work with you year-round, they’re definitely not a good choice. Any tax professional you hire should offer a guarantee of their services and agree to provide any necessary amendments, revisions, or audit support as needed after the filing season has concluded. If these services are needed because of an error the tax adviser made, the industry best practice is that those amendments, corrections, or revisions should be provided for free.  

Who Does the Work, and for How Much?

It’s also important to know exactly who will be handling your return and what the fees will be before entering into any agreement. Some larger CPA firms might hire an outside party to complete the actual tax paperwork, especially during peak season, but you won’t know that unless you ask. Even if the CPA firm doesn’t outsource the task, many people might be involved in the preparation of your business’ return. This isn’t necessarily a negative, but it is important you have all the information and have evaluated potential issues before you hand over the task.

As with any business relationship, it’s also essential to understand how charges will be calculated and when payment for services will be expected.

Don’t Get Too Comfortable

Once you find an Enrolled Agent or CPA you trust to handle your taxes, it’s important not to simply stick with them year after year out of habit. If your business is growing or has a complex structure, the benefits of a professional who is familiar with your business may outweigh concerns like lower price. 

However, it’s also important to ensure your tax adviser is educated about changes to tax policy, and that they’re equipped to handle changes in scope as the business grows or hires personnel and contractors in new roles. If there’s ever a year with a lot of change in tax laws, or change in your business, it may also be time to change up your tax adviser, or have a conversation with your current one about what to expect come tax time. 

Small Business CPA 401(k)

Choosing a tax adviser is a decision that should be based on research and data, but also on some more intangible qualities, like professional style and attentiveness. The best-qualified tax adviser in the world still won’t be a good fit for you if you feel uncomfortable trusting him or her or aren’t sure that you’ll be able to get what you need from him or her on an ongoing basis. By doing plenty of research, comparing rates and services, and meeting potential candidates in person, business owners will be in a position to make a good choice and establish a working relationship that can prove valuable for years to come.