And should you get one for yourself?
Don’t think you don’t need a tax advisor or that employing one is exclusively for the wealthy. You might spend a few hundred dollars hiring one, but you could save much more.
Because tax advisors are expensive, many SMEs choose not to use their services. However, a tax advisor can save you considerably more money than they charge.
A tax advisor, also referred to as a tax counselor, is frequently a certified public accountant or an enrolled agent. Compare tax advisors to the basic tax preparers you may come across. They may not be very knowledgeable about many legal issues and are better suited to filling out taxpayer paperwork with specific financial situations (like when you don’t have much money).
Here’s why it’s worth hiring someone well-versed in the tax code: The instructions for the 1040 form now contain 207 pages, up from two in 1940. Recently, the entire U.S. tax code had 3.7 million words. So it might be wise to work with a tax professional when completing tax returns. In addition, tax preparation software is convenient and can result in fewer mistakes when you file a return.
When should you hire a tax advisor?
When tax returns are simple, taxpayers may manage them on their own. For example, an adult with W2 income only owns a home, and does not itemize deductions, for instance, can easily prepare their tax return online.
However, your taxes will probably be more complicated if you are self-employed, own your own business, or have a variety of assets. Therefore, a tax professional might be a wise investment.
Here are a few financial scenarios where employing a tax expert may be beneficial:
● You are an SME business owner
● You don’t have enough time to complete your taxes
● You have one or more rental properties in possession
● You made mistakes with your taxes from the previous year.
● You need a professional’s help to lower your tax obligation legally.
Of course, this is not a detailed list. Personal and business taxes differ from one household to the next and from one company to the next. A good tax advisor can help you understand where you can save money on taxes and provide unique insights you would likely not find on your own.
What do tax advisors do?
Tax advisors provide services ranging from a one-time consultation to full-service tax preparation and defending your tax return in the event of an IRS audit. These are some of the most common tax preparation services that small business owners may seek from a tax advisor.
Remember that not all tax advisors provide all tax-related services; instead, look for an advisor who will meet your needs.
Expanding your enterprise, buying another business, hiring investors, or changing your business structure are just a few common business scenarios that might complicate your taxes. While some circumstances require one-time assistance, others can necessitate regular professional tax counsel. Hiring a tax expert can help you save time and enhance the accuracy of your return when your taxes get more complicated.
Compared to the outcome you can get by handling your tax return yourself, a tax advisor might be able to identify significant cash savings for you. This is still true even if you have previously utilized tax preparation software.
Lessen Tax Payments
A tax advisor may discover deductions and credits to reduce your tax burden that you were unaware of.
Most business owners focus on growing their company rather than learning the tax code. However, a tax advisor will have that knowledge because it is their specialty.
Managing Life Milestones
Some life events, such as marriage, divorce, or a financial windfall, can have tax implications. Similarly, starting, closing, acquiring, or merging multiple businesses can result in one-time and ongoing tax changes. An experienced tax advisor can guide you through the complexities of infrequent life and business changes that affect many taxpayers.
How to choose a tax advisor
You can ask friends and family for recommendations or look for someone on your own, such as on the National Association of Enrolled Agents website. Ensure that the new tax professional you’re considering is knowledgeable about the type of work you require, such as personal income or small-business taxes. Look for someone who has more than a few years of experience in the field and who has a preparer tax identification number.
Make sure your short-listed candidates have no blemishes on their record by conducting due diligence research on them. You can do so by contacting the Better Business Bureau or, in the case of accountants, your state’s board of accountancy. In addition, you can check the IRS’s Office of Enrollment for any disciplinary actions or licensing issues with enrolled agents.
Ask about affiliations with professional organizations, credentials, educational background, and licenses; feel free to request references. Ask the expert what will happen if you are audited if they are drafting your tax return. Most importantly, be sure you’ll feel at ease discussing and working with the candidate you’re considering.
Is a tax advisor worth the cost?
It’s difficult to overstate how much a competent tax advisor could save you throughout your life as a taxpayer; if you own a business or several assets, you can undoubtedly use a tax advisor.
Each year, lower tax liabilities help many firms recoup the cost of hiring a tax advisor (plus some additional savings). That presents a significant opportunity for your company to prosper.
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