Selecting a Tax Firm

Recently I have become involved with www.focus.com.  You may have seen the new Focus badge on the right. I have answered 2 questions so far, and will attempt to complete about 5 a month. Some of the answers I may post as blogs as well, as I feel they will be relevant and enjoyable to my readers.

This question asked to provide 3 tips for selecting a small and medium business tax practice. The beauty of this question is that if you ask 100 CPAs, you will get 100 different answers. There is so much advice you could give. Here is what I came up with.

1) The Find – Initial consultations should be free. Firms that nickle and dime you, may not be right for you. Pay attention to this. Also pay attention to that first meeting. The CPA or tax preparer should be very interested in you! The better they know you, the more value they can add to your engagement with them. Speaking of engagement, a reputable preparer will have an engagement letter for you to sign. This legally defines the scope of work they will be performing. Be alarmed if your tax preparer makes no mention of this. Remember, you may be shopping, but your not price shopping, your value shopping. The best tax preparer for you is the one who can offer you the most value, quality and integrity. Also, search for a humble attitude. No tax preparer knows everything, and some are uncomfortable telling you they don’t know the answer. Being a good tax man means you know how to get answers, it doesn’t mean they have them all.

2) The Firm – The size of the firm may actually be very important. Larger firms that deal with larger businesses may not put as much time into your tax planning and preparation because you are a smaller business and offer less revenue to them.They can’t offer as much value if this is the case. In the reverse, some smaller firms may not be able to offer a certain level of quality or expertise to larger companies. This is not a blanket rule, but the type of firm and size of the firm will make a difference and should fit your business. Every firm has their price point and ideal client. What kind of staff makes up the firm? Are they in the 21st century concerning technology? You want a firm with a competent staff who can offer you the most value by utilizing technology. You want a firm that will give you a heads up for tax planning when appropriate, send reminders for estimates and let you know when laws change that may benefit you. If the firm does not match up with you, you may not get the appropriate level of service.

3) Your Tax Guy – Don’t get so caught up in, my guy must be a CPA or attorney. I am a CPA and the training is rigorous and the experience comes from extremely long hours of work. I do believe that CPAs, EAs and attorneys trained in the tax profession are going to offer the highest qualify, but NOT ALL CPAs and attorneys do tax work. Make sure they are qualified in tax, and don’t just have the designation.

Secondly and most importantly, make sure your tax preparer works for you and not the IRS. Tax preparer liability, disclosure rules on uncertain tax positions and regulatory requirements have changed so frequently in the last decade that most tax preparers are no longer confident in taking a position they may have to defend with the IRS. Your tax preparer must have the confidence and aptitude to take positions that offer value to you, not just to the IRS. They must understand how to document them, disclose them (if necessary) and defend them. There is a lot of gray area in tax law (that is what tax court is for). For example, IRS publications have become great resources for tax preparers and tax payers like you, but they are not authoritative documents. They represent how the IRS wants you to do things, even if a court says you can do it another way!

Ask yourself this: if you hire an attorney to defend you in a lawsuit, do you expect them to defend you to the letter of the law, or simply comply with the prosecution? Choose a tax firm with preparers who know how to take positions based on the actually tax code, rulings and court cases instead of just following IRS publications. Otherwise, they are no different than the IRS doing your tax return. Pay attention to this if you can. Is your preparer communicating different issues with you? Do they seem to offer the highest level of competence, and even creativity?

Make sure your tax preparer offers the most value to your business.