By Maureen Brogie
The worst of tax season may nearly be over, but with changes brought about by the GOP tax reform, the next 12 months and beyond could see tax filing become more difficult for individuals and businesses alike.
As part of the Tax Cuts and Jobs Act 2017, which was signed into law in December 2017, the bill included reduced rates on pass-through business taxation and corporation tax, while also aiming to make the process of tax filing easier. All of this sounds like good news for small businesses, but is it?
According to Lee Reams from TaxBuzz.com, things may actually get more complicated:
“The Tax Act and Jobs Act (TCJA) has revised guidelines for pass-through entities, and the Section 199A deduction has added increased complexity for taxpayers. In addition, options for expensing and depreciating business assets have been modified, with 100% expensing available after September 27, 2017.”
To deal with these new complexities in tax filings, small business owners will need to understand exactly how the tax reform will affect them. But running a business is hard enough as it is – the last thing most proprietors need is to be burdened with learning the intricacies of a new tax bill and how it will affect them.
Fortunately, there are experts out there who can help, so if you’re not comfortable with preparing your taxes, there is still ample time to find someone who is. Our top tips will give you the rundown of the most important things to look for when choosing a tax preparer.
Speaking your language
If you’re not familiar with the latest tax lingo, appointing a preparer who doesn’t translate the jargon isn’t going to benefit you. Take time to speak with prospective tax preparers until you feel comfortable with one who talks your language, and makes things easy to understand.
Don’t be tempted to scrimp
Another part of the tax reform that won’t be welcomed by small business owners is that as part of the reform, expenses related to preparing and filing taxes (such as tax preparers or tax-preparation software) will no longer be deductible. However, this shouldn’t be a reason to try and find somebody who will do your taxes on the cheap. You usually get what you pay for – and it isn’t worth risking your business by employing the services of a tax preparer who’s not up to scratch.
Legitimate tax preparers will bill you hourly, or charge a flat fee. So be wary of those who say they can get you a big refund, and calculate their fee as a percentage of this promised refund.
Check their availability
Tax preparers are typically busy at the start of the new year with W2s, during the run-up to tax deadlines for business taxes in March, individual tax filings in April, and employee benefits in July. It’s important that you find a tax preparer who is available to be contacted with any questions you may have, before, during, and after filing season. Some tax preparers are ‘fly-by-night’ and may not be as easily reached once the busiest periods for tax filing are over.
Are they really credible?
It’s tempting to select a tax preparer on a recommendation of a friend, or when time-pressed, to pick the first person you come across on a Google search, but being indifferent about who you work with could result in serious repercussions for your business if something goes wrong.
A Preparer Tax Identification Number (PTIN) on a website or business card means nothing if it’s invalid. Equally, they should be registered on the IRS directory, with no black marks against them. Beyond checking qualifications and license validity, see what their clients have said about them online and ask for testimonials – they might have all the right credentials, but it’s crucial that they also provide a good service.
Cover your back
If something does go wrong with your tax returns, it’s good to have the reassurance that it won’t come back to bite you. A tax preparer should have errors and omissions insurance in case they do make an honest mistake. If they don’t have insurance, you may find yourself liable for paying fines to the IRS, leaving your business in a sticky financial situation.
A genuine mistake is one thing. But it’s worth remembering that as the taxpayer, you’re responsible for filing. So, if your tax preparer does something intentionally to generate a larger refund – like creating false exemptions or dependents – you could end up in a lot of trouble.
For this reason, it really does pay off to take your time when choosing a tax preparer, as working with the wrong person could put your business at serious risk.
Maureen Brogie is a Senior Advisor at InsuranceBee, a provider of small business insurance. Maureen holds a BS in Finance and is a licensed Property & Casualty agent in 40 states. Following a career break to raise her twin daughters, Maureen joined InsuranceBee in 2011 and now heads up a busy team of Client Advisors.