There are millions of reasons – literally – that I think it’s a good idea to hire a professional to manage, prepare and file your small or medium company’s taxes. Here are just a couple of them: estimates for the word count of the U.S. Tax Code range from 3.7 to 5.6 million. War and Peace, by comparison, seems almost paltry at 560,000.
As long as I’m counting words, my advice to business owners is simple. So simple, in fact, that I can summarize with just two: Hire someone.
It was one of the best business decisions that I ever made.
If you are still on the fence about shelling out your hard earned money for professional tax preparation assistance, here are some insights that might help. I spoke with Megan Sonicksen of the National Association of Tax Professionals (NATP), who believes that your taxes – whether personal or professional, whether relatively simple or painfully complex – deserve the attention of a pro. “Tax law is complicated, and it doesn’t seem to be getting any easier,” she said. “It’s difficult for a business owner to be compliant with tax obligations while at the same time not overpaying the government.” In other words, tax laws evolve on a regular basis, which makes staying on top of it all even more difficult, especially when you’re running a business.
When I asked Sonicksen to list a few of the main benefits of hiring a tax professional, I expected fairly standard answers about saving time and money. But she surprised me. “The taxpayer may assume an expense when really the item they purchased that year is an asset and should be depreciated over several years,” she said. “Depending on the type of business, there may be book-to-tax differences such as depreciation or accruals that must be reported on the tax return properly. A qualified tax professional stays current … and knows how to identify these occurrences.”
It is just that type of insight that led me to hire a tax expert when I ran my own small business. I saw it as a smart investment in my business to make sure that I had a pro that understood the tax rules, because I certainly did not. “Tax professionals who are experts in business tax know what deductions to take and what changes may have occurred since last filing season,” Sonicksen said. “A qualified tax professional can also help your business determine how much to pay in estimated taxes and what types of items to budget for in the year ahead.”
Once you’ve decided to support the SMB economy by outsourcing your tax function, how should you go about hiring a tax professional? First, visit NATP’s website. Once you’ve located an appropriate professional, be prepared to ask questions:
How long has he/she been in business?
What types of returns are they qualified to prepare?
How do they stay current on tax law?
Are they available throughout the year? If not, keep looking.
Finally, even though taxes are an incredibly complex subject, here’s something simple. When a tax preparer is paid to prepare taxes, they must sign the return. If a paid preparer does not sign the return, according to Sonicksen, he or she is not reputable.