What To Look For When Choosing a Tax Professional

Nov 2, 2022 | Uncategorized

At first glance, choosing a tax professional for your small business seems easy enough.

You Google “tax professionals near me,” read a few reviews, and book some interviews.

Simple, right?

Well, no.

As a tax professional with more than a decade of experience, I still find myself shocked at how casually some business owners treat their search for a tax professional.

But in their defense, most business owners have no idea that tax professionals offer a considerable range of different services and specializations.

I mean, the whole reason you’re hiring someone is that you don’t have enough knowledge to optimize your own tax situation, right?

But how do you choose someone to work with when, to use an old adage, “you don’t know what you don’t know”?

This month’s article considers what qualities you should look for when choosing a tax pro.

WHY SHOULD A SMALL BUSINESS HIRE A TAX PRO?

As the fabulous 6-figure coach or consultant you are, you’re undoubtedly investing much time and energy into bettering your business.

So when accounting and tax obligations come up (because let’s be honest…those numbers are pretty important), spending even more of your precious time and energy on bookkeeping, spreadsheets, and paperwork is a special kind of awful.

You know that feeling in the pit of your stomach when you realize tax season is coming up, and you still haven’t organized the pile of receipts languishing in your office?

A competent tax professional focused on optimizing your business’s tax strategy drains that feeling away faster than you chugged that pumpkin spice latte this morning.

WHAT QUALIFICATIONS DOES A TAX PRO NEED?

Listen carefully because I’m about to drop a crazy truth bomb.

Did you know that no credentials are required to call yourself a tax preparer in the U.S.?

That’s right. Any ole’ Jane or Joe can complete the IRS e-file Application and receive an EFIN (Electronic Filing Identification Number) to file tax returns electronically.

While the e-file application requires a “suitability check” for issuance, the check is pretty basic. It could involve a credit check, a tax compliance check, a criminal background check, and a check for prior non-compliance with IRS e-file requirements.

And while I’m sure we’d all love everyone in our business network to have a clean background check, passing a suitability check doesn’t do anything to show competence in tax accounting.

On top of this, in almost all states, the only thing you need to call yourself a “tax authority” is a $30.75 fee and 15 minutes to secure a PTIN (Preparer Tax Identification Number).

Wow.

So what’s an entrepreneur to do?

How do you know if the person you’re considering hiring is an actual, accredited, and experienced asset to you and your company?

Most people choose to hire an EA, CPA, or tax attorney to manage their taxes. Here’s a breakdown of those titles:

EA (Enrolled Agent)

An EA is a tax practitioner federally authorized by the U.S. Department of Treasury. This is the highest credential the IRS awards and requires the individual to pass a three-part comprehensive IRS test or to have been a former IRS employee. EAs are typically qualified to handle tax-related legal issues at the IRS level.

CPA (Certified Public Accountant)

Candidates must pass a rigorous exam to earn this title and be considered accounting professionals. For tax professional hiring purposes, you must confirm your potential tax pro’s specialization. CPAs can specialize in auditing, accounting, financial planning, and tax services. With so many service options, you want to ensure you find someone that can meet your needs.

Tax Attorney

Tax attorneys generally focus more on organizing business structures for optimal tax savings and on tax-related litigation.

Make Sure to Vet An “Unenrolled” Preparer

Beyond EA, CPA, and tax attorney, there are a few other credentials that can qualify someone to be a tax preparer.

The AFSP, or Annual Filing Season Program, is an unenrolled resignation in which the preparer takes an annual IRS exam.

You can find a list of enrolled and AFSP preparers in the U.S. Treasury’s Directory of Federal Tax Return Preparers with Credentials and Select Qualifications.

Beyond searching the directory, make sure your potential tax pro has a verifiable record of time working in the business.

QUESTIONS YOU SHOULD ASK.

So you’ve narrowed down your potential tax pros. You’ve vetted their credentials, and you’re ready to meet them.

This is an excellent time to ask those crucial questions that will separate the true professionals from the less experienced.

  1. What are your credentials?
  2. Do you have a PTIN (Preparer Tax Identification Number)?
  3. What tax software do you use?*
  4. What is your tax background?
  5. What is your area of focus?
  6. How do you stay up to date on tax laws and changes?
  7. What are my responsibilities as your client?
  8. What’s your availability if I have questions or concerns?
  9. What will happen if I get audited while working with you?
  10. What are your fees?
  11. Is pineapple an acceptable pizza topping? Why or why not?

Okay, that last one might cross the line. But until you can answer this question, do you really know a person?

*If the answer to question 3 is TurboTax or FreeFile, they’re considered a “ghost preparer,” or someone who prepares your taxes under-the-radar, but doesn’t sign the tax return. This is illegal and often points to a scam.

KNOWLEDGE AND EXPERIENCE – CHECK!

As an EA tax professional with more than a decade of experience, I’ve worked with over 2,000 taxpayers to resolve their IRS tax problems which are a mix of audits, back taxes, unfiled tax returns, garnishments, levies, and offers in compromise.

Hiring a tax pro like me with auditing experience can be highly beneficial for your business. My experience as an auditor means I have a window into how the IRS operates. My experience as a tax strategist means I know how to make sure my clients pay what they owe in taxes, but not a penny more.

You could say I bring the best of both worlds.

READY TO TALK STRATEGY?

If you’re ready to discuss a winning tax strategy for your business, start here!

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