Imagine a world where all your current tax dues were sorted on their own. You can finally take a breather for once. That sounds quite epic, right? Know what’s even more epic? The fact that you can start doing this today! Allow us to introduce you to the connoisseur of filing taxes, or in simple terms - a “Tax Professional.”
Now, if you’re still skeptical about whether tax professionals are even worth your time and money, data from the IRS would like to prove you wrong. As per IRS, the majority of e-filed tax returns (over 80 million) in 2022 were made by “professional tax preparers.”
Try comparing that to e-filed tax returns in the same year by business owners themselves – only 66.9 million. You see the point we’re making here, right? Tax professionals have attained their long-due spotlight and are a great resource. Let’s explore all you need to know about working with a tax professional and the advantages of having one.
Benefits of Working With a Tax Professional for Businesses
It’s important to understand that over 80 million people assigned their tax e-filing tasks to a professional for many good reasons. Small businesses may not know about the various workarounds to reduce the amount of payable tax.
Now, that is just one benefit of having a tax professional in your company. We’ll list down some more to give you a proper idea of why should seriously consider bringing a tax professional to the table.
Identify Tax Deductions and Credits
Did you know that there are business expenses that you can report to reduce the overall amount you owe to your federal and state government? In the legal world, we label them as “tax deductions.”
However, keeping track of these “deductions” can be complicated. Even if you miss out on a couple of them, you could end up paying thousands more than you should annually.
A tax professional is knowledgeable about how finance works in taxes. They can easily spot and tell you when a business or other expense can be added to the “deductions list.” The same is also true for tax credits.
While tax credits work a little differently than deductions, your tax professional will be able to distinguish between them and inform you accordingly. In short, you’ll be making the most of your tax deductions and credits.
Save Valuable Time
As a solo entrepreneur, you cannot do everything at once. One of the best advantages of having a tax professional is that they save you time. While you may spend almost an entire day compiling records, filling forms, and filing your tax return, your tax professional can do the same much more quickly.
This will also help you focus on other aspects of your business, such as marketing, selling, planning budgets, analyzing employee progress, or attending important meetings.
If you’ve ever filed a tax return form yourself, you’ll know how difficult and daunting it can be. This, coupled with human error, can lead to disasters. In fact, back in 2018, 80% of people missed an important step while filing their tax return.
The official website of the IRS also has a list of the most common mistakes people make when filing for taxes. Now, the good news is you can avoid all such errors with a tax professional.
We’re not saying that tax professionals don’t ever make mistakes, but you’ll hardly ever see any discrepancies when they’re doing the numbers. You probably won’t ever see them making any basic mistakes that most layman do as well.
Make Accurate Estimates
The tax rate, deductions, and rules can differ from one state to another. Depending on the type of business you run and your annual income, a tax professional can make estimates of your tax liabilities.
You can get clear data on how much you earn and owe to your respective federal and state governments. This is also helpful in ensuring you’re not short on money when the time arrives, preventing any penalties or extra charges as a result.
Be Updated With Current Tax Regulations
Another good thing about tax professionals is that they’re always up-to-date with the current tax rules and regulations. You can trust the experts to read the long policy updates and understand how they may affect you.
Your tax professional can also explain any new important policies in simple terms to help you and other decision-makers (if any) understand things better.
How to Find a Qualified Tax Professional for Business Tax Needs
Getting a tax professional may not be as easy as hiring a standard employee. Different businesses have different tax needs (such as managing international tax), and it’s important to find a professional that fits perfectly within those needs.
All tax professionals are experts at what they do by default. However, some may hold expertise in certain situations that can align with what your business needs. While there are no specific guidelines for hiring the tax professional you need, you can follow some tips listed below to get an idea of where you can start:
- Evaluate your current business needs.
- Try getting recommendations from other business owners or close ones.
- Look for professionals such as CPAs.
- Examine the experience of potential tax professionals.
- Ensure that the fee of the tax professional is within your budget.
- Hire a tax professional who specializes in your area of concern.
These tips can be useful in your journey to find a tax professional that manages your specific tax needs in the best way.
The Role & Effectiveness of a Tax Professional in Tax Reporting
Many business owners take it upon themselves to file taxes but are often stuck in the maze of traditionally complicated tax situations. In such cases, tracking your finances and managing your checking account tax reporting can be a much smoother process by bringing a tax professional on board.
A tax professional does more than just keep your business compliant with the tax regulations, some of which we’ve discussed earlier. However, concerning tax reporting specifically, a professional can ensure that your checking account transactions are handled accurately by sorting out the required tax forms, disclosures, and schedules.
By organizing records and transactions, the tax professional will take over the duties of maintaining your financial statements and completing tax returns and other related documents. Therefore, you meet the tax obligations with timely payments while saving yourself stress and time.
With tax planning strategies, they can also assist in beefing up and optimizing your business’s tax position. These experts can analyze your situation, identify tax-saving opportunities, and plan proactively for the future.
Streamline Tax Reporting with Technology
Ideally, you should simplify and streamline the tax reporting process from start to end. With almost everything being digitized with technology solutions, managing tax reporting has become more effortless than ever.
Tax professionals commonly link your checking account with cloud-based accounting software to automate the financials or bank feeds. This allows them to view real-time reports and ultimately reduces the risk of errors due to manual data entry.
Using a software system, you will also gain access to various resources regarding tax updates, laws, and deadlines. There are also other ways technology is integrated into managing your tax workflow, including:
With accounting automation, thanks to technological advancements, reporting taxes is becoming faster and more secure. Make sure your documents are protected and comply with privacy regulations using secure file-sharing services through encrypted schemes or secure file transfer protocols (FTP).
Data Management Systems:
Using data management solutions is another way businesses save money on paperwork while handling data accurately and securely. All tax-related documents are organized for easy retrieval and to enhance the collaboration between the tax professional and your business, as the information can be accessed from anywhere at any time.
Data Analytics and Reporting:
Tax professionals may also perform data analytics and report the findings through visualization to better manage risk. They take into account historical data and build forecasts and patterns that help your business make informed decisions for the future.
Not only can you manage risks, but you also have increased visibility on your tax cycle and compliance obligations. Both parties can work together and send real-time updates to facilitate collaboration.
Collaborating with a Tax Professional
Once you’ve set your eyes on who you want to hire, the next step is understanding how to communicate with your tax professional. There are four main aspects of successful communication with a tax professional which can help you derive more benefits at lower costs.
Effective Communications for Tax Implications
The first step to solid and effective communication with a tax professional about your business taxes is being genuine. Remember to provide all the necessary information regarding your business operations. Also, keep appropriate records and documents that contain bills of your expenses.
Do not hesitate to ask questions, solve doubts, or request recommendations on how you can reduce your overall taxable amount. As mentioned above, a tax professional can also devise a strategy that aligns with your current business needs. Hence, ensure to talk things through and create a plan that works best for you.
Negotiating Fees and Payment Structures
No one will understand the importance of having a third-party service under budget restrictions better than you – a business owner. Different professionals may charge monthly or have specific pay cycles.
Before you finalize a tax professional, ensure that their payment terms fit within your budget. If possible, try and negotiate the fee on the basis that you may hire them for a long-term period or be upfront about your budget. This can potentially save you a lot of money in the long run.
Maintaining a Long-Term Relationship for Ongoing Tax Reporting Needs
One more added advantage of tax professionals is that you don’t need to see them only once a year when you file your tax return. Try and keep communicating with your tax professional throughout the year.
You can inquire about any tax policy updates and how they can affect you. The list doesn’t stop just there. You can even gain advice on general financial matters or ask about changes in your tax liabilities due to new investments, expenses, or initiatives.
Tax obligations are not limited to the annual filing of tax returns. Foster an ongoing collaboration with your tax professional throughout the year. Regularly update them on any changes in your business, seek their advice on financial matters, and consult them on potential tax impacts of new initiatives or investments.
Have Regular Meetings
The last thing that will help you foster better communication with your tax professional is having regular meetings. You can bring your business, bank, and other related documents to discuss in the meeting.
If you have other decision-makers besides yourself, get them in on meetings too. This way, everyone can understand how much your business needs to pay and become familiar with the different tax forms. Meetings also help all business members to be updated about new tax policies simultaneously, which may potentially be beneficial for you.
Further, you can create a list that includes all questions you may have in mind to ensure nothing is left out. Last, but not least, remember to discuss your future business plans. Tax professionals can estimate whether any decision will increase or decrease your overall tax liability.
The Bottom Line
All in all, working with a tax professional has various benefits. Instead of filing your taxes manually every year and still being at the risk of making mistakes, it’s way better to let the experts handle it.
However, remember the tax professional that you do hire should be accredited and can provide appropriate assistance with your particular tax needs. If you cannot find a tax professional in your area, you can also try searching for a tax attorney to get consultation services. This can help you understand how to lower taxes.
Along with taxes, it is also important for a business owner to be aware of how a business checking account works. You can view our reviews of different banks to learn more about them here.
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