Who Can Prepare My Small Business Taxes?
You have your small business tax information in order, and now it's time to find a tax preparer. Who is the best person to help you prepare your tax return?
Although business tax returns can be prepared by a number of different types of skilled accounting professionals, some are better than others All Individuals who are paid to prepare tax returns MUST have a Preparer Tax ID Number (PTIN), provided by the IRS. At this point, no exam is necessary to receive a PTIN, but in future paid tax preparers will be required to pass a qualifying exam and background check. If you pay someone to do your business and personal taxes, ask to see the person's PTIN identifier.
Why Can't I Prepare My Own Small Business Taxes?
You can certainly prepare your own business tax return. In fact, anyone can prepare a tax return for someone else; you or your brother-in-law can prepare your tax return using online tax software. Here are three reasons why this isn't a good idea:
1. You don't know what you don't know. Even with tax software, you may miss critical pieces of information that could negatively affect your tax return. While the tax software companies ask a lot of questions to get you the best savings, they are a one-size-fits-all operation. They may not ask the right question for your specific business situation.
2. Business tax returns are much more complicated than personal returns. Each business is unique, and you need an experienced business tax preparer to make sure you are filing your return correctly.
3. A tax software company won't help you later. If your business tax return gets audited by the IRS, having a tax preparer who will help you is a major benefit.
What Does a Tax Preparer Do?
A good tax preparer fulfills several roles:
- Tax advisor. The preparer can also serve as a tax advisor, helping you make tax planning decisions.
- Preparer. Of course, the preparer can also prepare the tax return for you. This individual should sign the return, so it is clear who did the work.
- IRS Representation. Your tax preparer should also be able to help if you get audited, by representing you before the IRS and Tax Court. Not all tax preparers can do this. Certainly, you can hire someone after the fact to represent you with the IRS if you get audited, but it's always better to have the person who completed the tax return be present at the audit to explain what was done and why.
What are the Types of Professional Tax Preparers?
An accountant also may be able to prepare and sign tax returns, but the designation of "accountant" does not provide assurance of certification, nor does it give the accountant the ability to represent you before the IRS, even if this person has signed your tax return. Accountants are classified by the IRS as "un-enrolled preparers."
An Enrolled Agent is also able to prepare tax returns. An enrolled agent is an individual who has been given the privilege of practicing before the Internal Revenue Service (IRS), which includes preparing and filing documents, communicating with the IRS, and representing taxpayers in matters involving the IRS, including tax audits. But an Enrolled Agent cannot represent you in Tax Court. You can learn more about enrolled agents and how they can help your business in this article by Enrolled Agent Kirk Ward.
A Certified Public Accountant (CPA) is an accounting professional who has passed a qualifying exam and who is licensed to provide accounting and tax services to individuals and businesses. Most CPA's specialize, so find a CPA who does mostly taxes if you want a CPA to provide tax preparation and advisory services.
Read more about the difference between bookkeepers, accountants, and CPAs.
The Most Important Thing to Remember about Tax Preparers
No matter who prepares your business taxes, you (the business owner, are ultimately responsible for the accuracy and completeness of the tax return. Errors and omissions will cost you in fines and penalties, and you can't turn to your tax preparer and ask for the money.
Tips for selecting a tax preparer
Before you hire a tax preparer, check credentials. Ask for the PTIN and any licenses (such as a CPA license). Make sure the license is current. Tax preparers (CPAs and Enrolled Agents, for example) are required to take continuing education courses each year in order to keep their licenses.
A tax preparer who has not taken these courses does not have a legitimate right to sign tax returns. The IRS has some additional suggestions for selecting a tax preparer.