Taxes can be taxing for entrepreneurs and small business owners. Thankfully, tax season is nearly done and dusted, but looming on the horizon are potential changes to the way in which taxes will need to be filed once the GOP tax reform comes into full effect.
As well as aiming to make the process of filing taxes more streamlined, the bill promises rate reductions on pass-through business taxation and corporation tax. While the reductions will be welcome, the reform does little to simplify tax planning and preparation for business owners. In fact, if anything, it adds increased complexity in the form of complicated computations for each pass-through entity of a taxpayer, including sole proprietors, landlords, partners and S-corporation shareholders.
The consequences for filing taxes incorrectly can be severe, and with so many important things for business owners to focus on on a daily basis, would this be a task that is better off being outsourced to an expert, particularly in light of the upcoming changes?
Tax software, like TurboTax, may help make the tax-filing process more streamlined, but you just can't beat the reassurance that you'll get with working with an expert.
Over 60 percent of Americans trust a tax preparer to help them out with completing taxes on their behalf, according to the IRS.
But how do you go about finding the right tax preparer? By not properly vetting a tax preparer, you risk putting yourself and your business in hot water with the IRS if something is filed incorrectly.
How much you'll pay for a tax preparer depends on your situation, but as a general rule, prices will increase as your financial situation and your tax return become more complex. How you are charged again will vary, but most tax preparers charge by the hour, not on the size of your refund. If this is offered as an option, it should be seen as a red flag.
One thing to bear in mind is that as part of the reform, next year, expenses related to preparing and filing your taxes (including using tax preparers or tax-preparation software) will no longer be deductible.
Some reports have also predicted that tax preparers will charge more once the reform is fully rolled out, but as changes in tax laws go hand-in-hand with the job, there is no real reason that tax preparers should bump up their prices, so be wary of those that cite this as a reason to charge you more.
Even though it can be difficult to know if you are getting a good deal, going for the cheapest option might end up costing you more in the long term if they aren't up to scratch.
Don't assume that just because a preparer tells you that they have a Preparer Tax Identification Number (PTIN) that it makes them credible. Make sure you check yourself that they are registered and have the right credentials on the IRS directory, and see if any complaints have been made against them.
Having the qualifications and licenses are crucial, but it’s also worth checking them out online; this includes looking for reviews and ratings, and on social media. They could have all the correct paperwork but fall flat on delivering a good service, or be difficult to get hold of outside of filing season. You'd never know this without doing a bit more detective work!
And while qualifications are very important, if you aren't familiar with tax legislation and lingo, working with someone who uses jargon isn't going to be helpful. Make sure you work with a tax preparer who can answer questions in a way that is easy to interpret and understand.
Technically, yes, a tax preparer can be held liable if there are discrepancies in your tax filings.
If you want your business to be protected in case your tax preparer slips up and makes an honest mistake, ask whether they have Errors and Omissions insurance. That way, if they do make an error, you won't find yourself liable for paying fines to the IRS or any court fees that are incurred as a result of incorrect filing.
Ultimately, a taxpayer is responsible for their own filing. This means you could end up in a lot of trouble with the IRS if your tax preparer has done something malicious, such as creating false exemptions or dependents to generate a larger refund when preparing the filing on your behalf.
Take your time in finding a reputable tax preparer, as the repercussions of choosing the wrong person could be devastating to your business.
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