5 Tips for Selecting a Tax Preparer

I once had a small business owner (Joe) say to me, “Wow, it’s tax time again. I know I’ll have to write another big check just like last year.” I curiously asked him why, and the rest of our conversation went like this:
[Joe], “It always works out that way. I was told that when I started my own business I would realize some real tax advantages but it’s not working out that way for me.
(Before I could respond he received a call from a customer on his cell).
Me] “Well, at least your cell phone helps reduce your tax liability.”
[Joe] “What do you mean?”
[Me] “You were talking with a customer so that’s business use of your cell phone. Aren’t you deducting all or a portion of your cell phone bill as a business expense?”
[Joe] “I don’t know. My tax preparer has never mentioned it. I have had the same preparer even before I went into business but we have not talked about issues like that.”
[Me] “Hmmm…”

Joe’s situation is not an unusual circumstance in the world of entrepreneurship, particularly for new and young businesses. Business owners often rely on the titles CPA or professional tax preparer as assurance that they have the right person to minimize their tax obligation. Choosing a tax preparer is more than a casual exercise. Here are 5 tips for making the right selection for your business.

Experience with Business Taxes

All tax preparers are not the same. If the person that prepared your taxes before you started your business is not experienced in business tax issues, you need another tax preparer. The issues for individual vs. business taxes are worlds apart. Expenses that are deductible for a business may deductible for an individual. For example, Joe and his brother Dave can have the same cell phone, with the same contract plan, and the same monthly rate. However, Dave does not have a business so his monthly cell phone expense is not deductible. On the other hand, Joe uses his cell for his business thus all or part of his expense is deductible.
A CPA told me of a tax saving strategy of a small business owner. The business owner needed a new vehicle for his business and had his choice of vehicles. She decided to purchase a vehicle whose gross vehicle weight was at least 6,000 lbs. because at the time she made the purchase there was a provision in the tax code that allow her to write off the full value of the vehicle in one year, saving her thousands on her tax liability. Choose a tax preparer that prepares business taxes.

Calculating Taxes Up And Down


Tax planning

Preparing taxes for your business should not be haphazard or an eleventh hour task. A tax preparer that is interested in doing the best job for his clients engages them in tax planning annually. This involves meeting with your preparer during the course of the tax year to assess your tax liability and strategizing to minimize your liability and make more productive use of your funds. When selecting a tax preparer inquire about his/her approach to tax planning. If the preparer is not committed to planning, keep looking.Willing to Help You Understand

Willing to Help You Understand

You do not have to be a tax expert in order to be a successful business owner. However, you do want to understand fundamental issues related to how the process works. Select a tax preparer that’s willing to familiarize you with basic issues such as expense deductions, taxable income, record keeping requirements, etc.Compatible with Your Needs and Size

Compatible with Your Needs and Size

A colleague of mine started a convenience store. The store had one location, two employees, and $300k in revenue. He chose a large CPA firm whose ideal client were larger businesses with 75 employees or more, revenues exceeding $5 million, those businesses that have more complex operational issues. The firm did prepare his taxes and treated him professionally. However it could not provide the personal attention my colleague needed at rates he could afford.

When choosing a tax provider, select one that is compatible with the needs and size of your business as well as being affordable for your business. If your business requires your tax preparer to have specific industry knowledge related to taxes, find one with the necessary expertise.

Referrals from People You Trust

Referrals are a great way to find the right tax preparer for you is obtaining a referral from a trusted source. But do not take the referral at face value. Ask the person who is making the referral questions such as:

  • Why do you recommend the tax preparer?
  • What is his/her approach to serving clients (i.e. tax planning, helping clients to understand, accessibility, responsiveness, etc.)?
  • Did you have another tax preparer before, and if so how is the one you are recommending different?
  • What do you wish were different about him/her?

The objective is to assess the basis of the person’s recommendation which will help you determine if the tax preparer possess the qualities you need.

Apply these tips when selecting your tax preparer and you will avoid being like Joe.

Disclaimer: The above article is for information purposes and should not be construed or taken a tax advice. Please consult your tax preparer for professional advice related to your circumstances.

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