Don't wait until the end of the year to hire a tax preparer. You can find and begin working with someone on your business taxes at any time. This article provides some tips on finding a tax preparer who will do good work for you.
CPAs vs. Tax Preparers
Business owners should understand that not all tax preparers are CPAs, and not all CPAs do tax preparation work. While you don’t necessarily need to hire a CPA to do your taxes (there are many competent non-CPA professional tax preparers), you do need to consider what other kinds of services you might need, like choosing accounting software, setting it up and getting trained, data entry tasks, and review of records for tax evaluation.
Tax practitioners can be generalists or specialists and so can CPAs. Just be careful if any of them tells you they know everything there is to know about taxes. That’s a huge red flag. As you well know, the Internal Revenue Code is a massive piece of legislation and it would be literally impossible for anyone to understand it all.
Licensing Requirements for CPA's
The licensing requirements for CPAs vary from state to state as do the minimum and ongoing educational requirements. All U.S. CPAs have to pass a uniform examination, but the educational requirements to get (and stay) licensed are decided by the individual states. And CPAs may not be required to keep up to date on tax laws every year, so being a CPA doesn't guarantee that the individual knows any more about taxes than when he or she originally passed the CPA exam.
What an Enrolled Agent Does for Business Taxes
An enrolled agent is a person who has either passed a standardized test that covers all parts of the tax code or who has at least 5 years’ experience working for the IRS in a qualifying position. EAs are required to have 72 hours of continuing education every 3 years with a minimum of 16 hours every year. Like CPAs, they have to take an ethics course. Unlike CPAs (who can take accounting, management, technology, and personal development courses), EAs have to take all their courses in the area of Federal taxation.
While EA's must focus on tax information, a CPA who voluntarily keeps updated on tax issues might be more competent than an EA.
Selecting a CPA for Business Taxes
First, decide what kind of services you need. You may determine that you want someone to help with tax planning, to find someone who can help figure out the best ways for you to structure employee benefit plans and retirement programs to get the maximum tax savings.
What to Look for in a CPA
Your mission is to find a CPA who offers the type of services you need (and preferably specializes in them) AND is someone you’ll be comfortable working with. If the two of you have clashing personalities and/or work styles, then it won’t matter how competent they are. If the CPA is only available during “normal business hours” and you’re trying to start up a business by working nights and weekends in addition to your “day job,” you’re going to have a hard time connecting.
Ask around for recommendations. Talk to other business owners about which CPA they use, why they chose that particular person, and what it’s been like working with them. If your city has an independent rating service like Angie’s List or something similar, you might be able to find performance type reviews of local CPAs.
State Board of Accountants
It’s a good idea to check with the State Board of Accountants (or whatever the professional licensing agency is called in your area) to see if the CPA you’re considering is in fact licensed and in good standing.
Consider Price and Other Factors
After you have a list, call each person, and you can ask about prices, but I don’t advise making your decision based just on prices. One might seem less expensive, on an hourly basis, but our total fees also depend on the number of hours it takes to get the work done.
What’s included in “monthly bookkeeping” might not be the same for two CPA firms. One CPA might define it to be posting cash receipts and disbursements in QuickBooks while the other might also include preparing monthly journal entries, balancing the bank statement, and printing a profit and loss report.
Ask for a Preliminary Meeting
Ask the CPAs to meet in person to explain more about their services and how they work. Most CPAs are happy to spend 15-20 minutes doing this. During this time you’ll get a good feel for whether or not the two of you would be a good match.
Ask for References
Be sure to ask for references from current and past clients. And take the time to check those references. You want a CPA you can trust and one you’ll feel comfortable sharing the financial details of your life with. You need to be confident that your CPA won’t share those details with anyone else without your permission.
Choosing a CPA to help you in your business is one of the most important decisions you’ll make. It’s worth spending some time on.