A small-business tax advisor is a certified tax professional hired to help year-round with preparing and filing business taxes, offering tax and other financial advice and representing the business in the event of an audit. Other responsibilities include record keeping and planning for tax purposes and maximizing business tax returns. This person should not only have the qualifications and experience to assist with taxes, but also have specific knowledge of the intricacies of business taxes.
Here's what you need to know about small-business tax advisors to make your best decision.
Types of small-business tax advisors
Technically, anyone can be a small-business tax consultant — all they need is an IRS preparer tax identification number (PTIN). However, in order to ensure that your business and taxes are in the most capable hands, there are a few types of IRS-certified tax advisors you should know about. These kinds of tax advisors meet the additional skill, education and expertise requirements set out by the IRS. Even more importantly, they’re all authorized to represent you before the IRS:
Enrolled agents (EA): An enrolled agent is a tax professional licensed by the IRS. These professionals have passed a three-part special exam to demonstrate their tax proficiency or have worked at the IRS for a minimum of five years.
Certified public accountants (CPAs): CPAs are accounting professionals who have passed the CPA Exam and comply with the CPA requirements. CPAs offer a range of services, including tax preparation and filing.
Attorneys: Attorneys are law professionals who have passed the bar exam and are licensed to practice by their respective state. Although all attorneys technically fall under this IRS requirement, business owners will want to work with an attorney who specializes in business taxes.
If you’re looking for a business tax advisor, you’ll want to find a professional that falls into one of these three categories. Keep an eye out for someone who has specific experience with business taxes, not just personal taxes. A tax advisor who's familiar with small-businesses, startups or your particular industry, will be even more beneficial.
How to find a small-business tax advisor
A good place to start is with your business accountant or bookkeeper. If you already work with a CPA for your other accounting needs, they might have the experience to also serve as your business tax advisor. In addition, referrals are a great way to find a small-business tax advisor. Consult other business professionals you use and trust — or talk to other small-business owners for references.
If you don’t use a referral, you can try consulting professional tax organizations to find certified business tax advisors near you. The Association of International Certified Public Accountants (AICPA) website has a CPA directory and the National Association of Enrolled Agents can help you find an EA. Local bar associations can assist you in finding tax attorneys in your area also.
Questions to consider
These questions can not only help you assesses your business tax needs, but also the business tax advisor themselves to determine if they’re a good fit for your business:
1. What role will the tax advisor play on my financial team?
Will your advisor interact with the other members of your team (attorney, financial planner etc.) to make sure everything in your financial plan is working smoothly? Will they have access to all of your business finance tools like your accounting or bookkeeping software?
2. How much experience does the tax advisor have delivering the kind of results I'm looking for?
Ask the tax advisor to share some success stories from other clients they have worked with. Most tax advisors will be able to share stories, testimonials or even references with you. Make sure you check them out.
Don’t be afraid to ask about specific strategies the advisor has used. You want the advisor to respond with answers like “we educated the client on which costs were deductible” or “we restructured this client’s business to take advantage of lower tax rates,” etc.
What you don’t want to hear is evidence that the advisor has used aggressive strategies that would cause red flags with the IRS, or strategies that are just plain illegal. Listen for words like planned, restructured, educated and documented in the advisor’s answers — these are legitimate.
3. What experience does the tax advisor have with my issues?
Does the advisor have knowledge about your industry? Do they work with anyone inside your industry right now? Do they know about any trends or news that relates to your business? What can be done to either profit from or protect you against those trends?
You want to be working with an advisor who understands your business and specific issues concerning business taxes, like the small-business tax rate. If you have to educate your tax professional about how your business routinely operates, they probably aren’t the right person for you. A tax professional should refer you to someone else if your business is not their specialty.
4. What does the advisor do for their clients year-round?
Business (and life) happens year-round, not just at tax time. You need to be able to have access to your tax advisor all year long so if a situation comes up and you need guidance, you can get advice before the transaction or event happens.
If your tax consultant only does taxes between January and April and takes the rest of the year off, that should be a red flag to you. You want somebody who lives and breathes the tax code and can apply it to your situation. You also want an advisor that will stay in contact with you during the year and alert you to any tax saving opportunities that may arise.
5. What level of responsibility will they take for my tax return?
Finally, you want an advisor that will stand behind their work. If problems come up with your tax return, your advisor should be able to address them. If you face an IRS audit, your advisor should be able to help you through the audit process.
Asking questions like these will give you, as the business owner, the opportunity to assess your tax advisor needs, as well as the individual tax advisor themselves. Don’t be afraid to meet with multiple tax professionals to weigh their skills, experience and even personality — at the end of the day, it’s of the utmost importance that this person is right for your business and that you feel comfortable reaching out to them for help.
A version of this article was first published on Fundera, a subsidiary of NerdWallet