With the U.S. tax code spanning 2,652 pages at 450 words per page, keeping up with the latest IRS rules and regulations can be a superhuman feat. But ignoring tax law updates can cost your small business in lost deductions and reduced refunds. So if you can't keep up with important tax law changes, who will do it for you?
This is where a tax advisor can come to your rescue. A tax advisor can help you navigate the complex world of business taxes, ensuring that you stay compliant and take advantage of all the deductions and credits you're entitled to.
Bookkeepers and accountants are responsible for keeping track of a business's financial records including expenses, income, and assets.
A tax advisor, on the other hand, works with you to reduce your taxable income and maximize your tax deductions. Also referred to as tax consultants, their ability to understand and interpret the confusing and lengthy U.S. tax code ensures you're not overpaying Uncle Sam.
A professional tax advisor can do the following for your small business:
You may find that the label "tax advisor," is used to describe other tax professionals, including Certified Public Accountants (CPAs), tax accountants, and tax attorneys.
Another type of tax pro that often acts as an advisor is the Enrolled Agent. Enrolled Agents are the ultimate tax experts who have passed rigorous IRS exams and background checks. They are "enrolled" because they've been granted special licensing to practice by the federal government.
Related resource: What's an Enrolled Agent, and Why Should I Hire One?
One of the biggest differences between a tax advisor and a CPA is the educational level. A CPA holds a college degree and must pass the Uniform CPA Examination to be licensed. This prepares them to work with more complex financial matters as well as financial planning, forecasting, and analysis. Since they have several other higher-level responsibilities, CPAs won't typically specialize in tax preparation and filing.
In addition, because of their extensive knowledge and experience, CPAs, tax attorneys, and Enrolled Agents charge higher fees than bookkeepers. These advisors are generally recruited by businesses who need assistance with more complex tax situations and reporting requirements.
There are also advisors who can assist you with your taxes and provide guidance for common business matters, who don't carry specific qualifications or degrees. Their only responsibility is to keep abreast of the latest IRS laws.
It can be very easy to confuse a tax advisor with a tax preparer. While a tax advisor can also prepare your taxes, they provide more services for their clients than a preparer.
A tax preparer, such as H&R Block, will prepare, calculate, and file your income tax return on your behalf. They will also help you find deductions and credits you're eligible for and help you stay organized throughout the tax-filing process. Tax preparers are usually only available during tax season, between January and April.
A tax advisor takes the time to familiarize themselves with your finances and offer valuable advice that's tailored specifically for your business. They not only go over your present tax forms with you, but they educate you on methods to reduce your future taxes. A tax advisor can assist with tax planning for your business throughout the year.
A tax advisor's knowledge and expertise do come at a cost. However, their fees can vary depending on your location, the complexity of your tax situation, and the type of advisor you hire.
Enrolled Agents charge an hourly rate between $100 to $400. One-time fixed fees can range anywhere from $25 to $1,200, depending on what services you need. A customized yearly plan carries an average cost ranging from $1,300 to $2,000 for several services.
A tax advisor may also use a sliding scale fee system, meaning, the more financial services you need, the more you'll have to pay. Some may charge by the hour, completed tax return, or even by a percentage of your business's assets.
You may be curious about other options available to assist you with your taxes. For example, using do-it-yourself (DIY) tax preparation software, such as Turbotax Business, costs only around $90. However, your tax software can't give you personalized guidance that may result in a higher tax refund or lower tax liability, like a professional tax advisor can.
Here at Accracy, we also offer tax preparation services that include unlimited tax advisory support and filing services. You can call or email our team of experts as often as needed for one flat monthly fee.
With the uptick in the number of fly-by-night tax advisors and preparers in recent years, it's essential that you practice due diligence to find someone who is reputable and trustworthy. After all, you're entrusting them with your business's sensitive financial data as well as your personal information.
Here are a few ways to begin your search for an experienced, knowledgeable tax advisor:
Once you have a list of potential tax advisors, request an introductory meeting to ask questions and get a sense of their qualifications and experience. It's a good idea to interview at least three advisors before deciding on a suitable candidate.
How Accracy can help
Most business owners dread tax season, but it doesn't have to be a nightmare. With Accracy Accounting's unlimited tax advisory and filing services, you can rest assured that your financials will be in good hands. We'll work with you to ensure that you're taking advantage of all the deductions and credits you're entitled to, and we'll file your return for you so that you don't have to worry about it. Because our services are unlimited, you can call on us any time of year for advice or assistance.
Juggling the day-to-day tasks of running a business and trying to stay compliant with ever-changing tax laws can be daunting. If you're feeling overwhelmed by the prospect of doing your own taxes, or just want to make sure you're taking advantage of all the deductions and credits you're entitled to, it might be time to consider hiring a tax advisor. A good tax advisor can help simplify the process for you and ensure that you stay compliant with state and federal regulations.
Since any professional from a CPA to an Enrolled Agent falls under the tax advisor umbrella, you'll want to do your homework and find one whose experience not only fits your small business's tax situation, but whose fees are within your budget. To ensure they are trustworthy and experienced, obtain recommendations from other small business owners, colleagues, and check with local and national tax professional organizations.
A good tax advisor can be an invaluable asset to your small business. They can help you save money on your taxes and avoid costly mistakes, as well as ensure your taxes are filed correctly and on time. Then you can get back to what you're best at: running your business.
We are offering free 1 Month Basic Bookkeeping to all new customers so you can experience Accracy's seemless and professional services.
A second stimulus bill was passed with new benefits for small businesses. Read our simple guide to quickly learn how it impacts you.
Explore the importance of debt ratio in gauging financial health. Learn its calculation, implications, industry insights, and strategies for optimal financial stability.
The EIDL and PPP are different forms of COVID-19 relief for small businesses. Here's the breakdown of the differences (and which one you should go for).
