Small Business Tax Advisor Definition
A small business tax advisor is a certified tax professional hired by businesses to help year-round with preparing and filing business taxes, offering tax and other financial advice, and representing the business in the event of an audit. A small business advisor should not only have the qualifications and experience to assist with taxes but also specific knowledge of the intricacies of business taxes.
Perhaps one of the most difficult parts of small business ownership is dealing with taxes. Of everything involved in business accounting, taxes are not only the most difficult but also probably the most complex—and costly to your business if mistakes are made. For these reasons, many business owners work with a tax advisor. A small business tax advisor can take the hassle out of preparing and filing taxes, while also offering you financial advice and representing you in the case of an audit. If you think this type of person would greatly benefit your business, you’re not alone—but how do you find the right tax advisor for your business? There are a few things you need to know in order to find and hire a good business tax advisor: understand the types of tax advisors, what exactly they do, and what makes a good one.
What Is a Small Business Tax Advisor?
Before you can go about finding the right tax advisor for your business, you should know exactly what a tax advisor is. A business tax advisor is a certified professional who can help your business with your full range of tax-related needs. The role of a small business tax advisor, therefore, can include:
- Record keeping and planning for tax purposes
- Preparing business taxes
- Filing business (and possibly personal) taxes
- Maximizing business tax returns
- Offering tax and other financial advice for businesses
- Representing businesses in case of an audit
A business tax advisor is not someone you only work with during tax season, instead, it’s someone you consult with and utilize for your business tax purposes all year round.
Types of Business Tax Advisors
Technically, anyone can be a small business tax consultant—all they need is an IRS preparer tax identification number (PTIN). However, in order to ensure that your business and taxes are in the most capable hands, there are a few types of IRS-certified tax advisors you should know about. These kinds of tax advisors meet the additional skill, education, and expertise requirements set out by the IRS and therefore are the most reputable and are recommended to handle your business taxes—and even more importantly, they’re all authorized to represent you before the IRS:
- Enrolled Agents (EA): An enrolled agent is a tax professional licensed by the IRS. These professionals have passed a three-part special exam to demonstrate their tax proficiency or have worked at the IRS for a minimum of five years.
- Certified Public Accountants (CPAs): CPAs are accounting professionals who have passed the CPA Exam and comply with the CPA requirements. CPAs offer a range of services, including tax preparation and filing.
- Attorneys: Attorneys are law professionals who have passed the bar exam and are licensed to practice by their respective state. Although all attorneys technically fall under this IRS requirement, business owners will want to work with an attorney who specializes in business taxes.
If you’re looking for a business tax advisor, you’ll want to find a professional that falls into one of these three categories. You’ll also want to look for a tax professional who has specific experience with business taxes, not just personal taxes. If possible, someone who has a familiarity with small businesses, startups, or your particular industry, will be even more beneficial.
How to Find a Small Business Tax Advisor
So, you’re looking for a business tax advisor that falls into one of those three categories, but how do you start the process? If you haven’t worked with a tax professional before, where do you look?
A good place to start is with your business accountant or bookkeeper. If you already work with a CPA for your other accounting needs, they might have the experience to also serve as your business tax advisor. Even if you don’t work with a CPA, your accountant might have colleagues or references in their network that have the experience you need. Similarly, referrals, in general, are a great way to find a small business tax advisor. Consult other business professionals you use and trust—or talk to other small business owners for references.
If you don’t use a referral, another good route to explore is to consult professional tax organizations to find certified business tax advisors near you. You can go to the Association of International Certified Public Accountants (AICPA) website to access a CPA directory or the National Association of Enrolled Agents to find an EA. Local bar associations can help you find tax attorneys in your area. As you go through this process, you’ll want to meet with several different people to find the tax advisor that will work best for you and your business.
How to Choose the Right Business Tax Advisor
Now that you know the basics about small business tax advisors and where you can start your search for one, let’s dive deeper into how to find the right one for your business. Since this person is going to be working with you year-round and handling some of your business’ most important financial information, you want to be confident about the person you choose. These questions can not only help you assesses your business tax needs, but also the business tax advisor themselves to determine if they’re a good fit for your business:
1. What role will the tax advisor play on my financial team?
Will your advisor interact with the other members of your team (attorney, financial planner etc.) to make sure everything in your financial plan is working smoothly? Will they have access to all of your business finance tools like your accounting or bookkeeping software?
2. How much experience does the tax advisor have delivering the kind of results you are looking for?
Ask the tax advisor to share some success stories from other clients they have worked with. Most tax advisors will be able to share stories, testimonials, or even references with you. Make sure you check them out.
Don’t be afraid to ask about specific strategies the advisor has used. You want the advisor to respond with answers like “we educated the client on which costs were deductible” or “we restructured this client’s business to take advantage of lower tax rates,” etc.
What you don’t want to hear is evidence that the advisor has used aggressive strategies that would cause red flags with the IRS, or strategies that are just plain illegal. Listen for words like planned, restructured, educated, and documented in the advisor’s answers—these are legitimate.
3. What experience does the tax advisor have with your issues?
Does the advisor have knowledge about your industry? Do they work with anyone inside your industry right now? Do they know about any trends or news that relate to your business? What can be done to either profit from or protect you against those trends?
You want to be working with an advisor who understands your business and specific issues concerning business taxes, like the small business tax rate. If you have to educate your tax professional about how your business routinely operates, they probably aren’t the right person for you. A tax professional should refer you to someone else if your business is not their specialty.
4. What does the advisor do for their clients year-round?
Business (and life) happens year-round, not just at tax time. You need to be able to have access to your tax advisor all year long so if a situation comes up and you need guidance, you can get advice before the transaction or event happens.
If your tax consultant only does taxes between January and April and takes the rest of the year off, that should be a red flag to you. You want somebody who lives and breathes the tax code and can apply it to your situation. You also want an advisor that will stay in contact with you during the year and alert you to any tax saving opportunities that may arise.
5. What level of responsibility will they take for your tax return?
Finally, you want an advisor that will stand behind their work. If problems come up with your tax return, your advisor should be able to address them. If you face an IRS audit, your advisor should be able to help you through the audit process.
Asking questions like these will give you, as the business owner, the opportunity to finesse your tax advisor needs, as well as assess the individual tax advisor themselves. Like we previously mentioned, don’t be afraid to meet with multiple tax professionals to weigh their skills, experience, and even personality—at the end of the day, it’s of the utmost importance that this person is right for your business and will be able to fulfill your tax needs.
The Final Word on Small Business Tax Advisors
If you’re in the market for a small business tax advisor, don’t wait until the business tax deadline is around the corner—start your search now. Keep in mind the kinds of professionals you’re looking for as you go through the search process and don’t be afraid to ask tax professionals about their qualifications, experience, and specific services. Ultimately, only you can decide on the right business tax advisor, but once you’ve found them, you’ll have the tax consulting and expertise (not to mention save yourself time and stress) that your business needs and that will certainly benefit you in the long run.
Eric Levenhagen is a Certified Public Accountant and was one of the first 30 tax professionals in the country to earn the Certified Tax Coach designation. He is the managing member at ProWise Financial Coaching. Eric specializes in helping small business owners minimize their taxes, maximize their profits and enhance their life through entrepreneurial abundance. In 2015, Eric was selected by his colleagues as the Certified Tax Coach of the Year. Eric is also a contributing author to the best-selling book, “Secrets of a Tax Free Life.”