That’s why it’s critical to choose the right tax planning firm. But with so many firms to choose from, how are you supposed to decide?
Here, I explain what to look for to ensure your tax planning service is the right fit for you.
Tax planning, explained
To understand what tax planning service would be most advantageous for you, it’s essential to understand what tax planning actually is. Basically, tax planning is the strategy with which you position your business to owe as little as possible in taxes.
Experts in tax planning know how to minimize your exposure to taxes through various strategies. For instance, they can show you how to take advantage of tax deductions or credits, invest capital in accounts that aren’t taxed, and help you navigate even the most complex tax situations, such as if you are self-employed, have a lot of investments, or live abroad.
Talented tax planners can also calculate estimated taxes, allowing you to make tax payments quarterly throughout the year (or more often if you choose) so a big tax bill doesn’t hit you in April. In other words, a good tax planner saves you money while sparing you from headaches at the same time.
Notably, tax planners are different from accountants who do bookkeeping and create financial statements. While they may also provide help on taxes, it is not their primary focus.
On the other hand, tax planners are specialists who focus solely on helping you navigate the tax system most effectively. Securing the services of a skilled tax planner is essential to reduce your tax burden as much as possible.
Understanding Your Business’s Tax Situation
Understanding your business’s tax situation is the first step to picking the right tax planner. Do you understand the basics of how your organization is taxed? If not, now’s the time to consider the factors that can influence your exposure to taxes.
The first thing to consider is what kind of business you have. Are you a C-Corp? S-Corp? Still an LLC without having made an election?? Different rules affect different kinds of business entities, and tax planners can help you understand the tax implications of going with one kind of business versus another.
Geographic location is another critical factor. Because different states can have vastly different tax requirements for businesses, locating your business in one rather than another can make a big difference in how much you need to pay in taxes.
Before you meet with a tax planner, you should be able to explain these fundamental facts about your business. Additionally, make sure to know, with exact figures, how much money you make. It is also advisable to have an idea of which deductions and credits you could be eligible for and what you think your overall tax burden is, as this gives the tax planner a solid foundation on which to build.
However, don’t assume that every tax planner would be the right person to help your organization. Here are the best practices for choosing the right tax planning company.
How to pick the right tax planning company
Your tax situation is unique to you as an individual, so you should look for a tax planner with expertise in handling cases like yours. If you are a self-employed sole proprietor, for instance, you could probably use help identifying business deductions and should vet tax planners accordingly.
Another important consideration is how the given tax planner wants to get paid. Some tax planning services charge a flat rate, while others assess fees by the hour or garnish a portion of your tax refund. You should know what the fee structure is before work begins, so don’t hesitate to inquire about this at the beginning.
You should also ask what services you can expect from the tax planning company. While some will ask for additional funds to complete state taxes, others won’t. When comparing different companies’ fees, do the calculations to identify which might actually offer the best value.
A tax planning company with decades of collective experience is a good sign. Look for an established company with veteran staff who prioritize staying current with the latest tax rules and spend some time reading their reviews online. After all, you want to choose a company with legions of pleased clients.
As part of your due diligence, you should also look up the companies on the Better Business Bureau IRS websites
Another good thing to do is ask for the tax planner’s license to practice law. If they don’t have one, they should have obtained another relevant credential, such as an Enrolled Agent designation or standing as a Certified Public Accountant (CPA). It’s also a good sign if the tax planner is a member of the National Association of Tax Professionals (NATP)
Start looking for your tax planner today
While April 15th might seem far away, business leaders know it will be here in a flash. Since finding prospective tax planning companies and vetting them can take time, it’s best to begin this process sooner rather than later.
Arron Bennett — Arron Bennett, founder of Bennett Financials
In addition, Bennett periodically accepts Fractional CFO roles, guiding clients on how to reinvest tax savings to skyrocket their profitability and accelerate business growth.
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