As a business owner, taxes are one of the most important aspects of your financial management. Hiring a tax accountant can be a smart investment to ensure that you're saving money, avoiding legal troubles, and managing your finances efficiently. However, not all tax accountants are created equal. Choosing the right one for your business can be a daunting task. In this blog post, we'll provide you with some tips on how to choose the right tax accountant for your business needs.

Who are tax accountants and why do firms need them?

Tax accountants are professionals who specialize in tax-related matters and provide guidance and advice to individuals and businesses on tax-related issues. Firms need tax accountants for several reasons:

Compliance: Firms need to comply with various tax laws and regulations at the federal, state, and local levels. Tax accountants can help ensure that the firm is compliant with these laws and regulations, minimizing the risk of legal penalties or fines.

Tax Planning: Tax accountants can help organizations plan their taxes, taking advantage of available tax breaks and credits to minimize tax liabilities. They can advise on the timing of income and deductions to optimize the firm's tax position.

Business Structure: Tax accountants can advise on the optimal legal structure for the firm to minimize tax liabilities. They can help companies choose between different legal structures such as sole proprietorship, partnership, or corporation, based on the specific needs and circumstances of the firm.

Expertise: Tax laws and regulations are complex and constantly changing. Tax accountants stay up-to-date on these changes and have the expertise to navigate them. Firms can benefit from their knowledge and expertise, ensuring that their tax filings are accurate and complete.

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Types of tax accountants

Tax accounting can vary depending on the entity being analyzed, with different types of tax accountants specializing in various areas. Here are some examples:

Tax accounting for individuals: This focuses on items such as income, deductions, investment gains or losses, and other transactions that affect the individual's tax burden. It is not required for individuals to hire a tax accountant, although they can if they choose to do so.

Tax accounting for businesses: More information must be analyzed as part of the tax accounting process for businesses, including tracking earnings and outgoing funds directed towards specific business expenses and shareholders. While not required, larger organizations may use tax accountants due to the complexity of the records involved.

Tax accounting for tax-exempt organizations: Even if an organization is tax-exempt, tax accounting is necessary as they must file annual returns and provide information on incoming funds, such as grants or donations, as well as how the funds are used. This helps ensure compliance with laws and regulations governing tax-exempt entities.

It is possible for a tax accountant to perform all of these roles, but it depends on their level of expertise and the size and complexity of the business or organization they are working with. A single tax accountant may have a general understanding of all these areas, but they may not have in-depth knowledge and experience in all of them.

Tips to hire the right tax accountant

Here are some useful tips for selecting the appropriate accountant for your business needs.

1. Hire a Certified Accounting Professional

If you are seeking to improve your business's financial operations or encounter issues such as inadequate accounting software or difficulties transitioning to accrual accounting, seeking the assistance of a Certified Public Accountant (CPA) may be beneficial. Certified Public Accountants (CPAs) can add to their credibility by completing the required training. To become a CPA, individuals must have a bachelor's degree in accounting or a related field, and pass the Uniform CPA Exam administered by the American Institute of Certified Public Accountants (AICPA).

Mark Koziel, the American Institute of Certified Public Accountants (AICPA)'s director of specialized communities and firm practice management, suggests that if you are a small business owner struggling to navigate QuickBooks or unsure of where to start, it is a good indication that you should seek the guidance of a knowledgeable CPA.

The Enrolled Agent (EA) designation is granted by the IRS, which allows individuals to represent taxpayers before the agency. Attorneys and CPAs can also act as representatives in IRS meetings.

To prepare taxes for clients, you need to obtain a Preparer Tax Identification Number (PTIN), which is now mandatory for all paid tax return preparers before filing any federal tax returns.

The Accredited Tax Advisor (ATA) certification allows you to plan taxes for complex scenarios, such as high net worth individuals, estate taxation, and retirement planning. To take the exam, you need to have five years of experience. Having ATA status can enhance your career prospects and may be required for certain roles.

2. Consider their qualifications

Before you hire a tax accountant, you need to make sure that they have the necessary qualifications. Look for someone who is a certified public accountant (CPA), enrolled agent (EA), or has a degree in accounting. These qualifications ensure that your tax accountant has the knowledge and experience needed to handle your business's tax needs.

3. Check their experience

Experience is crucial when it comes to tax accounting. You want to work with someone who has experience in your specific industry and with businesses of your size. Ask the tax accountant about their experience, and don't be afraid to ask for references. A good tax accountant will be happy to provide them.

4. Consider their fees

The cost of hiring a tax accountant can vary greatly depending on their qualifications, experience, and location. Make sure to discuss fees upfront and ask for an estimate of the total cost. Some tax accountants charge by the hour, while others charge a flat fee. Make sure you understand what you're paying for and how it will be calculated.

5. Look for someone who communicates well

A good tax accountant should be able to communicate complex tax information in a way that you can understand. Look for someone who is responsive, attentive, and patient. They should be willing to explain any tax concepts you don't understand and answer your questions in a timely manner.

6. Consider their availability

During tax season, your tax accountant may be extremely busy. Make sure to ask about their availability and turnaround times. You want someone who can meet your deadlines and is available when you need them.

Skills to assess in a tax accountant

The role of a tax accountant demands a high level of expertise in preparing reports, presentations, financial analysis, statistics, and more. Employers prefer candidates with a university degree or higher, especially in finance or accounting, and specialized certificates such as CPA, EA, or CPO. Additionally, candidates must possess a certain level of understanding in tax law, accounting, finance, and should have at least one to two years of experience in accounting positions, such as tax, general accountant, or internal accounting.

Apart from these technical skills, tax accountants must be proficient in using office computers and software, including Excel for calculations, Powerpoint for presentations, and popular accounting software. They also need to have strong foreign language skills, especially in English, to work with documents and write financial statements. Effective thinking, analytical skills, caution, and attention to detail are essential to excel in this position. Tax accountants must work well under high-pressure environments, manage their time effectively, and communicate well with colleagues, management, partners, and the tax authorities.

You can make use of professional skill assessment solutions like HireQuotient’s skill assessments. We have curated specialized assessments that allow recruiters and hiring managers to make data-driven and informed hiring choices. Our assessments for tax accountants include:

- Accounting Assistant Test

- Accounts Payable Assessment Test

- Accounts Receivable Test

- Wealth Management Test

- Advanced Accounting Test

- Accounting Manager Test

- Intermediate Accounting Test

- Bookkeeper Test

- Junior Accountant Test

- Accounting Clerk Test

Cost to hire a tax accountant

As of January 26, 2023, the median salary for Tax Accountant I in the US is $61,617, with a typical salary range between $55,471 and $68,785. The pay may depend on various factors, such as your education, certifications, additional skills, and work experience.

Redflags to watch for when hiring a tax accountant

When hiring a tax accountant, there are several red flags that you should watch out for. These may indicate that the accountant is not reliable or qualified, or that they are engaging in unethical or illegal practices. Some red flags to watch out for include:

1. Lack of credentials: A tax accountant should have relevant credentials, such as a CPA, EA, or ATA. If the accountant does not have these credentials, or if they are unable to provide proof of their qualifications, this may indicate that they are not properly trained or licensed to handle your tax matters.

2. Overpromising: Be wary of tax accountants who make unrealistic promises about the outcome of your tax situation. If an accountant promises to get you a huge tax refund or to help you avoid paying any taxes at all, this should be a red flag. A reputable tax accountant will provide honest advice and help you navigate the tax system in a legal and ethical manner.

3. Lack of transparency: A trustworthy tax accountant should be transparent about their fees and the services they provide. If an accountant is evasive about their fees or does not provide clear information about what services they will provide, this may be a sign that they are not operating in an ethical manner.

4. Pressure tactics: Beware of tax accountants who use high-pressure sales tactics to get you to sign up for their services. A reputable accountant will provide you with information and guidance to help you make an informed decision, without using scare tactics or other high-pressure tactics.

5. Lack of communication: A good tax accountant should be responsive and easy to communicate with. If the accountant is difficult to get in touch with or takes a long time to respond to your inquiries, this may be a sign that they are not committed to providing quality service.

Important questions to ask

Q. What are your qualifications and experience in tax accounting?

This question will help you understand the candidate's education, professional qualifications, and relevant work experience in the field of tax accounting.

Q. What are your qualifications and experience in tax accounting?

It is important to know the qualifications and experience of the tax accountant to ensure they have the necessary knowledge and expertise to handle your tax needs.

Q. Can you provide references from past clients?

References can give you an idea of the tax accountant's level of expertise, professionalism, and effectiveness in handling tax-related matters.

Q. How do you stay up-to-date with changes in tax laws and regulations?

It is important to hire a tax accountant who stays up-to-date with changes in tax laws and regulations to ensure compliance and avoid costly mistakes.

Q. What types of tax returns have you prepared in the past?

This question can give you an idea of the tax accountant's experience with tax returns similar to yours, such as individual or business returns.

Q. Can you represent me in case of an audit by the IRS?

It is important to hire a tax accountant who can represent you in case of an audit by the IRS to ensure your interests are protected and your rights are upheld.

Q. How do you charge for your services?

Knowing how the tax accountant charges for their services and what is included in the fee can help you determine if their services are within your budget and expectations.

Q. Can you provide proactive tax planning advice?

A good tax accountant can provide proactive tax planning advice to help you minimize your tax liability and maximize your tax savings.

Choosing the right tax accountant for your business can be a time-consuming process, but it's worth it. A good tax accountant can help you save money, avoid legal troubles, and manage your finances efficiently. By considering their qualifications, experience, fees, communication skills, and availability, you can find the perfect tax accountant for your business needs. Follow our blog for more.

Expert Guide: Hiring the Right Tax accountant for Your Business Needs