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Finding a good (tax) man
By Cora
Barnhart • Bankrate.com
 Many
business owners decide they would rather concentrate on running
their business than completing paperwork.
While hiring a full-time accountant
seems like an obvious way to accomplish this, handing over tax chores
to a professional isn't a decision to be entered into lightly.
Regardless of actions taken by
a trusted expert, business owners are ultimately responsible for
any taxes owed by their businesses. This tax tip offers some advice
to business owners looking for a tax professional.
Wisdom from someone
who should know
The IRS doesn't recommend specific tax professionals. However,
in How to Choose a Tax Preparer, it does offer some tips
for selecting someone:
- Ask friends and family members for leads
on reputable preparers.
- Find out who does the competition's taxes
(they will be more familiar with tax consequences specific to
the particular business).
- Make sure any preparer who is obtained will
be easy to find in the future. If the IRS examines the return,
it is likely to have questions about how it was prepared.
If someone guarantees a refund before looking
at any financial records, look out! The IRS also recommends avoiding
anyone "who claims to have a special relationship with the IRS."
Even though the law requires paid preparers
to sign returns and complete the preparer area of the form, responsibility
for accuracy of the form ultimately falls on the taxpayer. A business
owner should never sign a blank form or sign in pencil. And he should
receive a copy of any completed returns.
Decide
what kind of help is needed
Malcolm Makin at Fidelity recommends taking the time to determine
exactly what kind of help is necessary since background, experience
and licensing vary among tax professionals. Someone likely to encounter
problems with the IRS should consider an enrolled agent or certified
public accountant.
Enrolled agents have passed an exam on tax law.
They are legally authorized to practice before the IRS, meaning
an enrolled agent can represent a taxpayer who is audited.
A CPA has an extensive background in economics
and finance and has passed a rigorous national examination. CPAs
are also authorized to represent clients before the IRS.
There are also highly trained tax attorneys
who focus on the more complex areas of tax law. A professional like
this would be appropriate for a business owner with income from
a variety of sources. If the taxpayer has initiated a complicated
tax shelter to avoid taxes, a tax attorney would be most likely
to recognize it and know if it is likely to attract unwanted attention
from the IRS. He may also know a better way.
There are also tax professionals with little
formal training or experience. They basically complete forms. While
they are likely to be less expensive, Makin reminds business owners
that it is important to understand that these people can't represent
an audited taxpayer.
Twenty
questions
Should a relieved business owner just hand off his records once
he gets a good lead on a tax preparer? Absolutely not. Makin recommends
taking the time to interview the tax expert. Ask specific questions
about background, experience, licenses, and of course, cost.
A business owner should find out if the professional
has other clients in his particular industry and, if possible, get
the names of two or three current clients that can be contacted
later. Also ask whether the expert represents his clients in an
audit, and what, if any, additional fees he will charge to do so.
Finally, inquire whether he has ever been professionally reprimanded
or encountered any other regulatory problems.
Once the return is completed, Makin recommends
double checking certain items:
- Make sure the name and address are correct
- Check Social Security numbers and the like
for accuracy
- Compare the return for the current year with
the return from the previous year. Ask the preparer to explain
any differences that seem confusing.
- Make sure that income figures match those
on the W-2 forms.
- Check to see that the preparer has signed
the return -- and sign it yourself.
Believe it or not, Makin says, a missing signature
is one of the most common errors on business returns.
Business owners with additional questions should
contact the American
Institute of Certified Public Accountants.
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