Financial Figures

Issues to consider with tax preparers

Small business owners and individuals often struggle to find the right professionals. I know I’ve made mistakes with business service providers as well as trade specialists at my home. It makes sense. You hire people to do things you don’t do. It can be tough to know who’s right or wrong for your needs.

Fortunately, there are easy ways to identify a good tax preparer. It’s not just the return preparation fee or mistakes made on current year reporting you need to consider. With the vast changes we’ve seen in tax law recently, mistakes are common with fees extending back three or even six years on returns.

How much does it cost? You’ve probably heard local firm claim they’re cheaper than the big guys. I’ve learned the hard way to be wary of those competing on price. Fixing unskilled results is expensive.

How do the national tax preparation chains operate? They don’t require experience from hires. There are no credentials expected. It’s unlikely your preparer is current on tax law. According to Indeed, the hourly rate at H&R Block for an office coordinator is $9.22. That’s below poverty level for a family of three. Ouch. Makes you wonder what kind of expertise you get from firms that claim they’re cheaper.

Financ ial Figures

What about credentials? CPAs may not have current tax knowledge, so ask about this. Enrolled Agents (EAs) are licensed by the IRS and specifically trained in federal tax planning, preparation, and representation. They’re also required to complete 72 hours of continuing education every three years.

It’s important to hire someone familiar with the constantly changing tax landscape. With credentials, advanced education is a given; continuing education requirements are likely. If not, the knowledge you’re getting may be old news. That’s scary stuff to consider for the small business owner. The IRS admits small business owners are 150% more likely to be audited than other tax payers.

By Michael Shelton

Executive Summary: Enter Taxman – but choose wisely.

QuickBooks Pro Advisors are useful too. New balance sheet and other reporting requirements for small business owners make this tool a wise one to integrate into your bookkeeping.

Focus on long-term thinking. DIY or cheap might seem prudent for your small business tax returns, but chances are, hiring the right provider will save more than the cost. Tax returns aren’t boiler-plate. A conscientious tax specialist can find tax saving strategies the “churn-mills” won’t.

There’s that peace of mind thing, too. Audits are stressful enough without the added challenge of trying to defend errors you can’t justify. Someone who understands not only recent tax legislation, but also your financial goals, is an important team member to have. Choose wisely.

Michael Shelton is a financial retirement counselor. Reach him at michael@discover360 Financial.com