Hiring a Tax Advisor for Small Business
For businesses, taxes are a year-round struggle. With tax season fast approaching, now is a great time to find a reputable tax advisor and start making a truly effective tax plan. In order to find the right professional, it’s imperative to understand what a tax advisor is.
If you’re a small business owner, you need a tax professional with real credentials and experience in your specific industry. This is the best way to fill your unique tax needs. In the following sections, we’ll discuss just how important having the right tax advisor is.
Why a Tax Professional is Such a Necessity
There’s no need to panic if you don’t already have a tax advisor on board. It’s never too late to find a skilled professional to assist you with your business taxes. To help motivate you, here’s a quick sample of the advantages you’ll discover when using a dedicated tax professional:
- Ensuring that all allowable deductions are taken, thus reducing unnecessary tax payments
- Helping with the proper choice of entity
- Keeping business on track with filing deadlines
- Advice regarding proper filing of international disclosure and informational forms
- Making sure that the business’s tax strategy closely aligns with the owner’s individual tax strategy
What Exactly is a Tax Advisor?
A tax advisor is an expert consultant who specializes in formulating business and individual tax strategies. They’re fully trained in United States tax laws and regulations. Tax advisors are also required to stay current with our country’s constantly changing tax regulations.
The IRS regulates tax advisors and determines which professionals can practice and represent clients. The IRS keeps track of many types of tax agents. These include enrolled agents, CPAs, attorneys, and other types of tax return preparers who are registered with the IRS.
What an Experienced Tax Professional Can Do for Your Business
Tax professionals can assist you with business taxes through the entire preparation process. This includes before, during, and after the day you actually file your taxes. Here’s what a qualified tax advisor can do for your business during each of these periods.
Prior to Tax Preparation
Although most people don’t worry very much about taxes until the last minute, it is recommended that you plan for them all year long. You should speak with your tax professional at least every quarter to make sure that you are minimizing your taxes in the way that’s most beneficial to your business. Before scheduling any meetings with your CPA or accountant it is best to know What to Bring to Tax Appointments. Because they’re required to stay current on tax regulations, your tax professional can advise you how to handle any changes and keep your tax bill as small as possible.
During the Tax Preparation Process
A tax professional can prepare both your personal and business tax returns. Keeping these together can coordinate your efforts and maximize your tax savings. The following scenario will illustrate why this is the case. It will also show the role a tax advisor plays in optimizing your return.
Let’s say someone owns a pair of S Corporations. During a given year, one of these businesses lost money while the other one showed a profit. First, a tax professional would have advised them on the S-Corporation designation in the first place. They would also ensure that both businesses took advantage of every allowable deduction. Additionally, remember that in this scenario, the tax professional is preparing the owner’s individual return as well.
The tax advisor would coordinate between the three returns to minimize the amount of taxes the owner would have to pay. The losses incurred by the first S Corporation would offset the profits of the second, resulting in reduced taxes. Without a tax advisor working for them, the owner in this scenario would surely end up paying more.
After Tax Preparation
Once your returns have been filed, a tax professional can keep you prepped for a possible IRS audit. A good tax preparer should be able to advise you on certain parts of an IRS audit, but only tax professionals with the right credentials can represent you in front of the IRS if things go that far.
Types of Qualified Professionals
The IRS lists several kinds of tax professionals who are eligible to work as tax advisors:
1. Tax attorneys
A tax attorney specializes in both personal and business taxes. A general attorney may not be current on business-specific regulations, so they probably won’t be able to give you the best advice on your taxes.
2. Certified Public Accountants
A Certified Public Accountant is an accountant who has passed the rigorous CPA exam and meets other experience and certification requirements as well. A CPA can offer a wide variety of financial services, but many specialize in a specific area like income taxes.
3. Enrolled agents
Enrolled agents are qualified to prepare taxes and represent taxpayers before the IRS.
Business owners need (and deserve) to have a qualified and experienced professional to advise them on tax-related matters. Not only will the right tax advisor minimize the taxes you have to pay, but they’ll also take a number of challenging responsibilities off of your plate. Just remember-- it’s not enough to contact your tax advisor once every year. Utilize their skills all year long to achieve the best results.
About Ivan Popov
Ivan has been counting for the past eight years for small and medium sized businesses helping owners with tax planning, financial covenants, financing and tax optimization.
Email: [email protected]
License ID: MA-32053