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Hiring the right tax professional could honestly make or break your freelance business.
A tax preparer is privy to all your financial details, including everything from your income, bank accounts, relationships and business ventures.
They even know your Social Security number so you want to make sure this person is qualified and trustworthy. You want to find someone who has the attributes and personality that you’re looking for. First and foremost you must be comfortable with them!
Here’s how to find the best tax professional near you, and to determine if you need to hire one or should go the DIY route.
1. Look for a pro who works with freelancers
In other words, you want to work with a tax professional who specializes in your type of business. The IRS is a bit behind on the laws related to running an online business so a knowledgeable CPA or tax pro will be able to help you successfully navigate these unknowns.
In the past 15+ years I’ve been a tax professional turned freelance financial expert, and I’ve discovered many self-employed tax professionals who also run their own business online.
This makes me feel confident that they will fully understand the ins-and-outs of being a virtual freelancer and be able to recommend the best tips and advice for paying less taxes.
I highly recommend working with the following tax and bookkeeping pros.
- Melissa Whaley from Whaley Bookeepping
- Eric J. Nisall from Accountlancer
- Tai Stewart from Saidia Financial
2. Use these online resources
I can’t stress this fact enough, but if you have an online business you need to work with a tax expert who’s online. DUH, right?! But it’s an easily overlooked fact.
Use the below go-to resources for finding the best tax professional near you. They’re tried and tested by me and also recommended by many other freelancers within the Careful Cents community.
- FreshBooks Accountant Map
- ProAdvisor Directory for QuickBooks
- Xero Accounting Advisor Directory
- Search the IRS directory
- A simple Google search using your location
Depending on which bookkeeping software you use — whether it’s FreshBooks, QuickBooks or Xero — you can find a pro who specializes in these programs. I’m actually a Certified FreshBooks Bean Counter, so I too can answer any questions you have about the program.
3. Verify the PTIN and other certifications
Every legit tax professional must have a valid PTIN (Preparer Tax Identification Number) that’s included in the signature part of the tax return. You can see this section in the image below, next to the “Paid Preparer Use Only” section.
If this section is blank, you may be encountering a problem with the legitimacy of your tax pro. You can easily verify a tax preparer’s PTIN using the National Directory Registry of Professional Tax Return Professionals.
Another important aspect of a good tax professional is that they must participate in continuing education programs. This helps keep tax professionals on the cutting edge of tax law changes and various updates that are happening that may affect you.
For this reason, they’re often members of professional organizations, such as the National Association of Tax Professionals or the American Institute of Certified Public Accountants. Verify their credentials and inquire about any continuing education or other certifications they may possess.
4. Ask for recommendations
Who do your friends, family and fellow entrepreneurs use to file their taxes? Ask around for recommendations and referrals for the best tax preparers in your area.
This is something I see a lot of within business-related Facebook groups that I’m a part of. Since these groups are often closed or private, you can be sure that the advice will be non-promotional and usually very helpful.
Just keep in mind though, that someone else’s tax preparer may not be the best fit for your needs or business. Take recommendations with a grain of salt and don’t be afraid to test out a few different accountants before finding the right one.
5. Compare tax prep fees
The best tax professionals usually charge by the hour or by the number of forms/complexity of your return. If you come across someone whose rates are based on the size of your refund, this is definitely a red flag.
When it comes to preparing taxes, a tax professional’s rate should not be based on their performance of how much money they can get you in return.
According to the U.S. Tax Center, a survey done by the National Society of Accountants showed that the average cost for preparing a 1040 along with a Schedule C Tax Form (for being self-employed) is $370.
Other tax forms, such as preparing an 1120 Tax Form (for C corporations) costs upwards of $806, so be prepared to pay several hundred dollars for the best tax filing services.
DIY taxes vs hiring a pro
Now that you understand how to find the best tax pro near you, the next question is whether or not you even need to hire someone to do your taxes. As a self-employed freelancer, your income and expenses are likely always changing, in which case it’s usually best to hire a tax pro or accountant.
In the beginning of your freelance career though, it may be pretty simple to DIY your own taxes. But as the years go one and your revenue streams increase, you may find that you need more and more guidance to help file your income taxes.
As we get older and our businesses become more complicated, it’s important to evaluate how much tax advice and help we need. Here’s how to determine whether or not you should DIY taxes or hire a professional.
Should you file your own taxes?
There are various factors to consider once you decide to file your own taxes. In addition, there are several benefits to DIY taxes yourself. For example, filing your self-employed taxes could save you nearly $500 per year as most Schedule C tax filing software costs less than $80 to file.
It’s also less time consuming to file your own taxes since you can do so on your own time. You don’t have to make an appointment with a tax pro and sit in their office for hours on end. So this is definitely not a decision you should make hastily.
Before deciding how to file taxes yourself, ask these important questions.
- Are you a numbers kind of person? If you enjoy keeping track of all the numbers, transactions and receipts then by all means you’re the best person for the job. You know the ins-and-outs of your situation the best and can control everything accurately.
- Is your tax situation simple or unchanged? If you only have a few clients, don’t have any dependents and have no other investments or sources of income, you can easily file your taxes on your own. The IRS even offers free efiling for taxpayers who have simple returns.
- Do you own property or investments? Once you acquire property, have multiple businesses, investments or retirement accounts, it can be difficult to stay up-to-date on everything. Each type comes with deductions and credits that can be very beneficial to your taxes. Having a professional to help in the case, is probably the best idea.
- Do you understand tax laws? If you can browse the IRS website, comprehend their tax jargon and stay up-to-date with changing tax laws, then go ahead and feel confident about filing your taxes.
Some tax forms and laws are simple and can be interpreted with a little research. Independent Contractor, Sole Proprietor and LLC Taxes Explained in 100 Pages or Less, is a great guide if you’re attempting to do your own self-employed taxes.
Should you hire a tax professional?
While I’m slightly partial to hiring a professional as a self-employed freelancer (being a tax expert myself), I do know that it’s really only necessary for certain situations.
Hiring a professional comes with additional benefits. You don’t have to stay updated on the always-changing tax laws as you can pick their brains anytime. You’ll have another pair of eyes to catch any mistakes or missed tax deductions. They may also know about additional tax savings that you may not be aware of.
Still, before deciding to hire a tax professional, ask these important questions.
- Do you need help managing your money? If doing the books and tracking the numbers just isn’t your forte, please hire someone to help. There is no reason to get yourself into trouble with the IRS or get in over your head. Hiring a tax preparer is like finding the right tool for the right job, the whole thing can be done correctly from the beginning (and potentially save you money in the long run).
- Have you started or expanded your business? Starting a new business or hobby venture takes expert knowledge. You wouldn’t jump off a diving board without swimming lessons, so you shouldn’t try to do your business taxes without some guidance. Tax experts can help you find lots of deductions and prevent you from getting into trouble. Those savings and peace of mind alone, can pay for themselves.
- Did you have a big life change? If you got married/divorced, had another child or lost a spouse, you might need help finding the best filing status for that year. Some of them are easy, but others (like being a widow) have time sensitive dates. Also, as your dependents get older tax credits and deductions might expire depending on their ages. Determining these situations accurately takes someone who is knowledgeable.
In the end, DIY taxes versus hiring a pro is completely up to what you’re most comfortable. You can always find a tax expert to get you started and then phase them out if you don’t need their on-going advice.
Just remember though, having a trustworthy tax professional near you can make all the difference when it comes to tax time.