About 40% of all small businesses pay close to $845 in tax penalties and fees for making mistakes on their taxes.
Many of these mistakes are avoidable, but small business owners choose to do taxes themselves. If you’re in this boat, it’s time to hire an accountant. They’re experts in tax code and they can save you time while you focus on building your business.
Hiring the right accountant for your business is one of the most important decisions you can make for your business.
Read on to find out how to hire an accountant for your business.
What Does an Accountant Do?
An accountant is usually used by businesses to do small business taxes. There is so much more that an accountant can do for your business.
They can analyze your expenses and tell you what you can do to save money on your next tax bill. They can set up your chart of accounts in your accounting software. They can also audit your books to ensure regulatory compliance.
You might wonder what the difference is between a small business accountant and a bookkeeper. A bookkeeper does a lot of the data entry into your accounting software.
They’ll reconcile your accounts, connect your banking information to your software, invoice clients, and enter expenses. The information that the bookkeeper handles
The Types of Accountants
As you start to look for accountants, you’ll notice some designations that accountants use. The most common designation is CPA, which means Certified Public Accountant.
This is different from a standard accountant. An accountant is a person who when to school for accounting and obtained a degree. A CPA is someone who passed a board exam and has met a strict set of requirements.
The exam and requirements are given by each state’s board that oversees accountants. These requirements will be different in every state.
You’ll also come across IRS enrolled agents. These are former IRS employees or accountants who passed an IRS exam. Enrolled agents are certified by the IRS to represent businesses and individuals in tax matters before the IRS.
How to Hire an Accountant for Your Business
Now that you know what the types of accountants are and what they do, it’s time to start to find one that’s right for your business. You should begin by learning how accountants bill for their services.
This will vary from one accountant to the next. Typically, accountants bill an hourly rate for consultations or for tax preparation services.
Other accountants will charge per document prepared for the tax return. The more complex the form, the more it will cost. You’ll then need to know the types of payments accepted and when the amount is due.
You want to have an accountant that has experience in your industry, especially if it’s a highly regulated industry. An accountant or CPA without industry experience may but your business at risk.
You also want to check if they can represent your business where you do business. A franchise that has locations in several states will need multi-state representation.
Who Does Your Tax Return?
You may look to hire an individual accountant or an accounting firm to do your taxes. In both instances, that accountant may not be the one working on your return.
The individual accountant may look to hire additional people to handle the workload during tax season. A firm may have several people working on your return.
Be sure to ask who does your tax return and how they communicate any potential issues with your taxes.
Keeping Up with Changes
The last few years have seen more changes to the tax code in recent memory. Many more changes are being implemented as a result of the coronavirus pandemic.
For example, if you took out a PPP loan that was forgiven, you can’t deduct the business expenses that the forgiven loan paid for. That can result in a larger than normal tax bill for many small businesses.
That may change with legislation, but it’s unknown right now. There are other proposals being floated, such as payroll tax cuts, and tax credits for small businesses to keep employees on the payroll.
Be sure to ask potential accountants how they keep updated on the changes.
Type of Tax Advice Given
A good accountant will do your taxes and answer any questions that you may have about your tax return.
A great accountant will look at your returns and tell you how to maximize your tax savings in the future. For example, these accounting services will help you with a variety of services to help reduce your financial risk.
You want to make sure that you understand what kind of advice your accountant will give. Many accountants will not provide insights on tax savings because they don’t want the liability to do so. They will stick with what they know and answer questions that you have.
They’ll be able to tell you how to provide documentation when to pay estimated taxes and be very conservative when it comes to taking deductions.
It’s important to follow up and ask if the accountant charges for these questions. Some won’t charge paying clients for questions, while others will ask you to schedule and pay for a full consultation.
Hiring an Accountant Is a Good Business Move
As a business owner, you know that cash flow is the only thing that keeps your doors open. A small business accountant can ensure that you manage your funds well and limit your tax liabilities. That can give you a bit more cash flow in your business.
You need to know how to hire an accountant to find the right one for your business. Hiring a CPA that’s an IRS enrolled agent with experience in your industry is the right choice for your business.
You want to make sure you get the advice you need to make smart business decisions and understand how they bill. Check out the home page of this site for more financial tips and advice.