Six Critical Questions to Ask When Selecting a Tax Preparer

Small business owners who keep employees on payroll are the most likely candidates to seek tax preparation solutions. The services of tax attorneys or CPAs tend to be too costly for small business owners, who are more likely to choose online tax filing solutions or the services of a tax preparer.

Taxation is one of the most crucial aspects of small business operations. There is virtually no room for error; missed filings or incorrect calculation could result not just in thousands of dollars in lost or forfeited income and fines, but they may also attract the attention of IRS auditors.

When choosing a tax preparation professional, small business owners must first learn how they can find a reputable service to help them file their 1099 and W-2 forms as well as their annual income tax declaration.

The following six questions can help business owners in selecting an ideal tax preparer:

1. What are your IRS credentials?

   Over the last few years, new IRS rules require preparers to obtain a Preparer Tax Identification Number (PTIN). Just because a tax preparer has a PTIN does not mean he or she is actually endorsed by the IRS; the only individuals who can be considered to be endorsed to an extent are Enrolled Agents and Enrolled Actuaries, who are actually licensed at a federal level.

2. What is your PTIN?

   In January 2015, the IRS launched a database of tax preparers, enrolled agents and individuals who have voluntarily registered in the Annual Filing Season Program. Armed with a PTIN, small business owners will be able to search the IRS records and see if it matches the name, state, city, and zip code of the preparer. Without a PTIN, tax returns cannot be submitted to the IRS e-file system.

3. How do you store and protect sensitive information?

   When it comes to electronic tax filings, the only correct answer is end-to-end data encryption, which is an encryption process that securely encodes the information entered so that it cannot be intercepted or interrupted by hackers or other malicious actors. The IRS e-file system will only work with software solutions that have this feature. Electronic data should not be the only information protected at a tax preparation office. There should also be filing cabinets that can be locked as well as paper shredders.

4. Where do you print and mail IRS Forms W-2 and 1099?

   To a small business owner, one of the most attractive services a tax preparer can offer is the ability to print and mail Forms 1099 and W-2 to independent contractors and payroll employees. This process cannot be accomplished from any office printer; the IRS must first approve a tax preparation office as a secure print-and-mail facility for this purpose. To this effect, certain data encryption and protection standards must be evaluated by the IRS prior to obtaining this certification.

5. Do you offer state filing service?

   When it comes to small business taxation at the state level, each jurisdiction can be unique to a certain extent. The intricacies of state taxation are generally not as complex as those of the IRS, but only CPAs tend to be licensed in this regard. A tax preparer who admits that he does not handle state taxation but works with a partner for this purpose could be taken as a sign of a resourceful professional.

6. When will I get a copy of my tax return?

   A business owner who arrives at a preparer’s office with every single piece of paperwork needed to file a return may be able to get a copy of his or her return on the first visit, but only if the preparer has actually had time to review the documents and conduct an interview. After the initial visit, the preparer should be able to print a copy each time there has been an amendment.