Tax filing can be one of the most cumbersome activities for startups. That is why you hire a tax professional so he or she can handle all the tax-related tasks and you do not have to get your hands dirty.
Here are some pointers that will help you choose the right tax preparer for your business.
1. Expertise
As a startup owner, you often tend to take tax filing lightly and do not give much attention to hiring a tax professional. However, you should make sure to hire an experienced tax preparer. An experienced tax professional knows the ins and outs of the tax filing process and can get you the maximum tax relaxation.
It does not mean that the novice tax preparers are not capable of taking care of your taxes. However, if you are hiring a tax professional, why not hire an experienced one?
2. Qualification
When an individual holds the responsibility of filing your taxes, you are obligated to know his or her qualification. However, you should not be overwhelmed if the tax preparer holds a bunch of designations under his/ her name.
The tax professionals have different qualifications depending on the services they offer or the examinations they have passed. You should analysis the tax requirements of your startup and select the tax professional accordingly.
Also Read: Indonesias tax management startup OnlinePajak raises US$25M led by Warburg Pincus
Here are some professionals who offer tax-based services-
1. CPA – A Certified Public Accountant (CPA) are individuals that are responsible for managing the finances of customers, including transaction and taxes. A CPA can be specialized in taxes; however, it is not necessary.
2. Enrolled Agent (EA) – Startups can hire Enrolled Agents if they need to be represented in front of the IRS. An individual can become Enrolled Agent by passing an exam or by working in the IRS for a minimum of five years. IRS does not put any limitations on the practice right of EAs, which means that they can handle all tax matters.
3. Certified Financial Planner (CFP) – The CFPs offer financial planning to startups on insurance scenario, future investments, cost optimization, and long-term tax strategy. Hence, startups can hire a Certified Financial Planner if they are planning for the future. However, not all CFPs offer tax services. Therefore, you should ask the CFPs about their list of services before hiring one.
4. Accredited Tax Preparers (ATP) – The Accredited Tax Preparers (ATPs) and Accredited Tax Advisor (ATAs) is a credential provided by the Accreditation Council for Accountancy and Taxation (ACAT) to individuals that pass the respective exams. These credentials ensure that the individuals are well-versed to handle all your tax-related issues.
3. PTIN
A PTIN (Preparer Tax Identification Number) is a pin used by the IRS to identify the tax preparers. All enrolled agents, as well as the tax professionals that are involved in filing taxes, should get a PTIN as it is required to be filled in the tax forms. However, some tax forms do not require PTIN.
Hence, it is essential for every entrepreneur to check for the PTIN before hiring a tax preparer, so you do not have to suffer while filing taxes.
4. Type of tax
Hiring a tax preparer also depends on the type of tax you want to file for your startup. There are some tax preparers who are proficient in filing federal taxes but are not aware of the local taxes of your state and vice-versa.
Hence, you should hire a tax professional who can file both federal and state taxes, taking the burden of tax filing off your shoulders.
5. Fees
There is an ocean of tax professionals out there. However, like all other aspects of your business, you want someone who asks for a reasonable fee for filing taxes.
Also Read: How will Goods and Services Tax (GST) affect businesses in India?
The fee asked by different professionals can vary on many accounts. They can be anything from the number of forms filled to the size of your business. However, if they guarantee a refund larger than others, do not get lured into the offer. They might be using illegal methods to get you that refund.
6. Technology
According to the IRS, in 2019 filing season, the total e-filing was estimated to be 127,939,000 of which 71,725,000 were filed by tax professionals. These large numbers indicate that a majority of them prefer to file their taxes online.
Hence, you should hire someone who is tech-savvy and prefers e-filing of taxes.
Moreover, the tax preparer should also make use of advanced solutions such as cloud-hosted tax software available in the market to reduce manual errors.
Tax filing should be hassle-free
Tax filing should be the least of concerns of any startup. They should be able to focus their time and energy on core processes for future growth. Hence, it is necessary to hire a tax professional that will take care of all tax issues, not just filing.
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