Managing Your Business Taxes Drives Business Success
Nothing leads to more gnashing of teeth than the thought of preparing your taxes. Fortunately, there are people out there that do it for a living.
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If the thought of preparing your taxes makes you queasy, don’t worry. Preparing your taxes is a job that can be shipped out to others. These individuals, known loosely as tax preparers, prepare tax returns year-round. Here’s a breakdown of the different types of preparers.
Primary preparers are the least trained but the cheapest to hire. They tend to be part-time workers who are individually employed. Our work at large outfits is like the letters H and R in its name. This can be a good choice if you have a simple tax situation, like basic W2 wages and no homeownership.
Enrolled agents are a step up from primary preparers. These individuals are licensed by the IRS and must take continuing education courses to maintain their license. That being said, they are not formally educated in finance or tax. Enrolled agents are typically more competent than primary preparers but less than CPA. If you have a tax situation requiring a basic 1040 filing with one or two schedules, an excellent enrolled agent should be able to take care of it. If you are looking for more sophisticated tax planning to cut your tax bill, a CPA is probably your best choice.
A CPA [Certified Public Accountant] is a highly trained and licensed individual. Passing the boards to become a CPA is extremely difficult. Once a person becomes a CPA, they also are required to pursue up to 40 hours of continuing education. Of course, the downside of using a CPA is that higher competency translates to higher costs. Still, you get what you pay for, so a CPA may be the answer if you are doing well financially and are looking for guidance on tax planning.
Tax attorneys are a beast unto themselves. Tax attorneys can save you a bundle with sophisticated plans if you’re bringing in the big bucks. Tax attorneys are also the people to see if the IRS decides to have a go at you. While CPAs can handle the tax issues raised by the IRS, CPAs tend to know next to nothing about evidentiary law. A reasonable tax attorney will throttle the IRS on legal issues.
So, who should you use to prepare your taxes? It depends on what you are looking for and your finances. Generally, the more complex your finances, the more competency you should look for. If you have the money, go with a CPA. A good one should be able to save you far more than their fee.
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