Share what you know with millions of people
Focus is the best place to turn what you know into remarkable content
0
Tax Preparation Best Practices: What are your 3 tips for selecting a SMB tax preparation service?
Please list, in detail, 3 best practices you would like to share with the Focus community on how to choose a SMB tax preparation service. High quality contributions will be included in an upcoming report on tax preparation services, and will receive significant promotion on the Focus network.
Events
- Dos and Don'ts of Small Business Marketing May 29 @ 11 am PT
- Lead Nurturing 202: The Next Generation May 31 @ 11 am PT
- The Tricks to Paid Media June 6 @ 11 am PT
- Display Advertising for Brand Awareness June 20 @ 11 am PT
Related Activity
7 Answers
1) The Find - Initial consultations should be free. Firms that nickle and dime you, may not be right for you. Pay attention to this. Also pay attention to that first meeting. The CPA or tax preparer should be very interested in you! The better they know you, the more value they can add to your engagement with them. Speaking of engagement, a reputable preparer will have an engagement letter for you to sign. This legally defines the scope of work they will be performing. Be alarmed if your tax preparer makes no mention of this. Remember, you may be shopping, but your not price shopping, your value shopping. The best tax preparer for you is the one who can offer you the most value, quality and integrity. Also, search for a humble attitude. No tax preparer knows everything, and some are uncomfortable telling you they don't know the answer. Being a good tax man means you know how to get answers, it doesn't mean they have them all.
2) The Firm - The size of the firm may actually be very important. Larger firms that deal with larger businesses may not put as much time into your tax planning and preparation because you are a smaller business and offer less revenue to them.They can't offer as much value if this is the case. In the reverse, some smaller firms may not be able to offer a certain level of quality or expertise to larger companies. This is not a blanket rule, but the type of firm and size of the firm will make a difference and should fit your business. Every firm has their price point and ideal client. What kind of staff makes up the firm? Are they in the 21st century concerning technology? You want a firm with a competent staff who can offer you the most value by utilizing technology. You want a firm that will give you a heads up for tax planning when appropriate, send reminders for estimates and let you know when laws change that may benefit you. If the firm does not match up with you, you may not get the appropriate level of service.
3) Your Tax Guy - Don't get so caught up in, my guy must be a CPA or attorney. I am a CPA and the training is rigorous and the experience comes from extremely long hours of work. I do believe that CPAs, EAs and attorneys trained in the tax profession are going to offer the highest qualify, but NOT ALL CPAs and attorneys do tax work. Make sure they are qualified in tax, and don't just have the designation.
Secondly and most importantly, make sure your tax preparer works for you and not the IRS. Tax preparer liability, disclosure rules on uncertain tax positions and regulatory requirements have changed so frequently in the last decade that most tax preparers are no longer confident in taking a position they may have to defend with the IRS. Your tax preparer must have the confidence and aptitude to take positions that offer value to you, not just to the IRS. They must understand how to document them, disclose them (if necessary) and defend them. There is a lot of gray area in tax law (that is what tax court is for). For example, IRS publications have become great resources for tax preparers and tax payers like you, but they are not authoritative documents. They represent how the IRS wants you to do things, even if a court says you can do it another way!
Ask yourself this: if you hire an attorney to defend you in a lawsuit, do you expect them to defend you to the letter of the law, or simply comply with the prosecution? Choose a tax firm with preparers who know how to take positions based on the actually tax code, rulings and court cases instead of just following IRS publications. Otherwise, they are no different than the IRS doing your tax return. Pay attention to this if you can. Is your preparer communicating different issues with you? Do they seem to offer the highest level of competence, and even creativity?
Make sure your tax preparer offers the most value to your business.
The selection of a tax provider for your business is an important decision and should not be taken lightly. While tax rules may seem fixed and not subject to much judgment, this is actually not true and there are many choices and elections that a small business may make that can significantly impact the tax bill. Also important is the form of business that you are as you will be taxed differently. For example, if your form is a C corporation, your corporation will be taxed by itself in accordance with corporate tax rates. As an S corporation, you will pay the tax personally. These elections can have a major impact and a tax professional needs to take you carefully through them before you incorporate.
The choices for tax provider are many and range from individuals that practice alone through "big 4" accounting firms with international tax expertise. There are also medium and small sized CPA and public accounting firms that handle business taxes. One of these will be right for you.
The first decision you need to make is to seek advice from a financial advisor or trusted person for how complex your tax needs really are. If your business is pretty simple, i.e. a consulting practice or service provider, you may be comfortable with an individual provider that is not a CPA. If your business carries inventory, has accounts receivable, complex accruals, revenue recognition issues and the like, you will want a provider that has industry experience and will not invent the wheel to do your return. Also important is the ability to work with the same person every year so that this person will know your business.
For most small to medium sized business that have some complexity to their return, I recommend selection of an accounting firm that specializes in their industry. Meet with several professionals that are recommended to you, ask them about their other clients in your industry, and ask them what specific problems are faced by firms like yours. You should get a warm feeling that they are like you and will understand your business. Then ask about ideas for tax planning that are applicable to your industry. They should be willing to share a few, such as the way you may wish to handle new capital investment under the tax reform law just passed. Then ask how much will be the cost to do the return and provide tax counseling for your firm. This is not the time to go with the least expensive, but at the same time quotes will vary and you don't have to take the most expensive either.
If you plan international operations, I recommend a large firm, perhaps from the Big 6, who can deal with complex issues such as transfer pricing and has tax offices in countries where you expect to operate. You should expect to pay handsomely for this kind of service, but consider the alternative, really getting in trouble for your practices with multiple taxing jurisdictions.
There are various opinions on whether the firm that does your audit should also do the tax return. Unless you are planning to go public or the cost is unreasonable, I recommend that the tax return be done by the same firm. The communication between auditor and tax preparer can be valuable and save you time.
Finally, don't think that Federal and State income taxes are your only headache. Your provider also needs to support you in the local and state tax areas including property and sales taxes. From long experience, failure to properly compute and pay these taxes will haunt you long after the savings are gone. In California where I consult with small business, it is only a matter of time until the Board of Equalization will visit to review your collection and payment of sales taxes, and local jurisdictions will audit property tax as well. So have a firm that can help in these areas as well to assure your compliance with the law.
Good luck in your selection of a tax provider.
Choosing an SMB tax preparation service:
1. Go for high standards and quaility, forget cheap is best!
2. Go for agreed time limits and agreed fees, nothing worse than taking longer than expected and then getting an eye watering bill.
3. Go for experience, use a service that has experience, knowledge and connections, these are key.
4. I know only asks for 3, but I have to repeat this, cheap is not best, it is usually a false economy.
1. Go to a CPA. CPA's are required to take continuing education as part of renewing their license. CPA firms have people who solely practice in the tax area.
2. Get an engagement letter from the firm you deal with. An engagement letter will detail the services provided, expectations of both parties and the fees associated with the preparation.
3. Make sure at your meeting you bring all requested data and ask any questions you may have.
- Ask other people in your line of business who they recommend. You want someone who is familiar with tax laws that affect your field of business. Someone who is great with manufacturers might not be an expert on restaurants.
- Schedule an initial no-charge meeting to talk with the person and see if they're right for you. This is not a method to get free tax advice - don't ask them specific tax questions, just find out about their style, personality and philosophy to help determine if you'll be able to work together well.
- Pick the type of professional who fits your needs and budget.
CPAs have passed a rigorous accounting test, but they may have passed it 30 years ago, and tax laws change. Also be aware that not all CPAs specialize in tax. You want someone who does tax as their primary area of practice.
Enrolled Agents (EAs) have passed a test specifically about tax, and are required to take continuing tax education. They are often former IRS agents who know how the system works.
CPAs, EAs, and lawyers can represent you before the IRS in case of an audit.
There will be a new category next year of IRS registered tax return preparers. They will be tested by the IRS to verify their competency. Most tax preparers who are not CPAs or EAs will be taking this test. These tax preparers are more affordable, and many very small businesses and sole proprietors find that they meet their needs.
Look for credentials such as CPA or EA.
Look for experience working with small business. The finances of a small business and its owner tend to be highly integrated, you want a professional that understands that.
As for recommendations from friends and business associates.
Chemistry is important. Find someone you are comfortable sharing all your deep, dark financial secrets with.
Excerpted from my book, The Home-Based Business Guide
~planning a business
~choosing an entity
~IRS approved tax deductions
For a free copy email oneunitedteam@aol.com and request your free copy. Only the first 20 requests will be given a free bokk, plus postage/shipping charges in US 2.50. Otherwise you may order your copy at www.steppingstonestosuccess.name
Answer This Question