Planning for and preparing your taxes is a year-round responsibility for small business owners. Whether you are just getting your business started or have been running strong for years, there are a number of benefits to hiring a tax professional.
What is a tax professional?
A tax professional is a finance expert with training in tax laws. There are regulations governing who can serve in this capacity and represent taxpayers before the IRS, and you should try to stay away from individuals the IRS does not recognize as tax professional.
“Someone who does not meet the IRS requirements is probably not a good person to use as a tax advisor,” Jean Murray writes in a May 2018 article for The Balance’s Small Business. Qualified individuals include tax attorneys, Certified Public Accountants and Enrolled Agents.
One of the principal benefits of hiring a tax professional is that they should be up to date on the latest tax regulations, which change every year. However, before you hire a professional, make sure they specialize in business taxes and not just personal taxes.
What does a tax professional do?
Tax professionals can help you with your business throughout the year: before, during and after it’s time to file. “You should be talking to your tax pro at strategic points during the year — every quarter, at a minimum — to discuss strategies for minimizing your taxes,” Murray advises.
They can also do the work of preparing your business and personal tax return for you, and after your tax returns are filed, you can turn to them for help should you get audited. If it comes to it, they can also represent you before the IRS.
When do you need a tax professional?
There are a number of situations in which you may want to hire a tax professional. For starters, they are the most qualified individuals for helping you save money. If you think you stand to save more money on your taxes with the help of a professional than it costs you to hire one, the decision almost makes itself.
Furthermore, hiring a tax professional saves you the trouble of going through your own records and preparing your taxes yourself. The IRS says the average American takes 16 hours to complete Form 1040 alone. Depending on the size of your business, hiring a tax professional could help you save a substantial amount of time.
There are also specific reasons you may elect to hire a tax professional, such as mistakes on a previous tax return. “If you find mistakes on a past year’s return and it’s within three years, a professional can help you file an amended return and minimize the damage,” Susan Johnston Taylor writes in a March 2016 article for U.S. News & World Report’s Money.
Another good time to hire a tax professional is when purchasing or selling real estate, as well as when getting your small business started, as it’s important to get started the right way. “Your first-year tax elections can impact your business’s tax filings in future years, so it pays to start things on the right foot and grow from there, even if you’re a sole proprietor,” Taylor says.
Preparing for taxes is arguably one of the most important aspects of running a business. In the short and long term, it pays off to hire a tax professional.