Business tax season is a year-round responsibility for business owners. Now is a good time to find a tax professional and start planning your business taxes for the upcoming tax season. In this article, we'll look at what a tax professional is, what kind of credentials a tax professional needs, and how this individual can help you with your business taxes.
A tax professional is someone who has the experience and credentials to help you with taxes, specifically business taxes. A tax professional is more than just a tax advisor.
Why You Need a Tax Professional
You don't have a tax professional you trust to help you with your business taxes? It's never too late to start looking. Having a good tax advisor can mean the following:
- Saving money at tax time.
- Not having to pull out the records and do it yourself (and that's about as painful as going to the dentist).
- Having someone who can help if you get audited.
What Is a Tax Professional?
A tax advisor is a financial expert with training in tax laws.
A tax professional should be up to date on current tax regulations, which change every year.
Tax advisors are regulated by the IRS, which also determines the types of professionals who may practice before the IRS. Included in this list are attorneys, CPAs, enrolled agents, and other registered tax return preparers.
What Does a Tax Professional Do?
A tax professional can help you with your business taxes before, during, and after-tax preparation. Below are some specifics.
Before Tax Preparation
A professional tax advisor can give you advice on tax planning, but tax planning isn't done just before the end of the year; it continues throughout the year. You should be talking to your tax pro at strategic points during the year—every quarter, at a minimum—to discuss strategies for minimizing your taxes (legitimately, of course—avoiding, not evading). Tax professionals are current with tax laws and regulations, like the major tax law change in 2017, and they can advise you on how to navigate these changes to keep your tax bill lower.
During Tax Preparation
Your tax professional most probably will also be your tax preparer, doing the work of preparing your business tax return and your personal tax return. If you pay business taxes through your personal tax return, the same person should be doing both returns so you can coordinate tax savings. For example, a loss on your small business taxes (through Schedule C) can be applied to your personal tax bill to lower your overall taxes. And lower business income means lower self-employment taxes, which you must pay personally along with income taxes.
After Tax Preparation
When your tax return is filed, there may still be work for your tax professional to do if you get audited. It makes sense to have your tax preparer be the person you turn to for help if you get a letter from the IRS saying you are being audited. This person should have the standing to be able to represent you before the IRS during an audit.
IRS-regulated tax professionals (attorneys, CPAs, Enrolled Agents, and other registered tax preparers) can go with you to an IRS audit or represent you at the audit.
Who Can Be a Tax Professional?
As noted above, the IRS lists several types of financial professionals who can serve as tax advisors and who can represent a taxpayer before the IRS. Someone who does not meet the IRS requirements is probably not a good person to use as a tax advisor.
- A tax attorney: Look for an attorney who specializes in business taxes, not just personal taxes. A general attorney is probably not going to have the current knowledge of business taxes to be able to give you good advice.
- A certified public accountant (CPA): Find a CPA who is licensed to practice accounting in your state and who has expertise in business taxes. An "accountant" is not a CPA, by the way.
- An enrolled agent: This is a tax professional who has qualified to prepare taxes and represent taxpayers before the IRS. An enrolled agent cannot represent taxpayers before a tax court.
Before you hire a tax professional, read about the mistakes to avoid when hiring a business tax preparer.
Tax Professionals Preparing Business Taxes
Anyone can prepare tax returns for others, but you might want to find someone with experience. For example, your brother-in-law might be able to do your business taxes using a tax preparation software, but paid tax preparers must register with the IRS and receive a PTIN (paid taxpayer ID). Read more about how to find a good tax advisor/tax preparer.