One of the most important decisions a small business owner makes is who they should hire for financial advice. Choosing the right accountant or tax attorney can help a company grow and be profitable.
But too often, owners decide to hire a friend of a friend, or someone they heard about third-hand. They don't take the time to research and interview different prospects to determine who would be the best fit.
Just as bad, some don't even seek out the help of an accountant. They might decide to make do with a paid tax preparer who can help at tax time, but who probably isn't qualified to help with year-round business planning.
ONE SIZE DOESN'T FIT ALL
You might hear of an accountant or attorney who's just brilliant. But if he or she knows nothing about your kind of business, you won't get the best advice possible. You could even lose money.
Marcia Suelzer, a senior tax writer with Business Owner's Toolkit, a division of Wolters Kluwer, noted that the government has tax breaks for specific industries. For example, "if I'm a restaurant owner, there are tons of exceptions for the normal inventory rules that I can take advantage of, but my buddy who has a local gift store, they can't," she said.
So if you hire an adviser who's unfamiliar with the restaurant industry, you won't be able to take advantage of those tax breaks.
Many companies do business in more than one state, particularly when they're located near the border of another state. Suelzer said an adviser who's well versed with one state's tax laws but not another's won't be able to help the multistate company.
And you probably want to avoid big accounting firms whose clients tend to be larger corporations. They may not be able to give you the one-on-one attention that many small business owners need.
HOW TO SHOP FOR AN ACCOUNTANT OR TAX LAWYER
Suelzer advises business owners to approach hiring a financial adviser in the same way they'd hire an employee.
"Start thinking, what do I need from this person," she said. "If you want tax planning and business advice, you don't want someone who's just a tax return shop."
Start by asking other business people, particularly those in your line of work, for recommendations. You probably want to meet with several.
Suelzer suggests asking these questions:
—How many clients do you have in my line of work?
—How up to date are you with the latest technology and government requirements for electronic filing? (The IRS is increasingly requiring companies to file tax forms online.)
—In the case of a large accounting firm, will I work with one accountant, or will I have to deal with someone new each time I call?
—How are you going to save me money on my taxes?
—How much will working with you cost me? What is your entire fee schedule?
"If they're worth their salt, they're going to be able to answer those questions," Suelzer said.
A prospective adviser should also be asking you questions about you and your business, to get a sense of your needs. And ask to see your prior year's tax return, to get a sense of your company's finances.
A CAVEAT ABOUT PAID PREPARERS
If you do decide you just want help in preparing your taxes, you should know that the IRS is starting to regulate paid preparers.
A paid preparer can be any of the following: a certified public accountant, tax attorney or someone known as an enrolled agent. An enrolled agent is someone who can prepare returns and represent taxpayers in matters involving the IRS. But a paid preparer can also be someone who took a course in tax preparation. He or she may work for a company like H&R Block or Jackson Hewitt, but there are paid preparers who work independently.
Starting with the coming tax season, paid preparers will be required to obtain ID numbers from the IRS, said David Williams, director of the agency's return preparer organization.
And in the coming years, preparers will have to pass a competency exam. Those who are CPAs, attorneys and enrolled agents will be exempt from that requirement because they have already passed exams to qualify for their professions.
Preparers will also need to take continuing education courses each year, Williams said.
Williams called the requirements "a first step to ensure that small businesses and taxpayers in general can be more comfortable that the people they select to do their returns know what they're doing."