Are Tax Accounting Services Good for Small Businesses?


It’s probably one of the least exciting things about running a business, but it’s essential. And the good news is that you don’t have to tackle it yourself. You can hire a small business accountant to do the job for you. 

Still, it’s good to be hands-on where taxes are concerned. Keeping informed about taxes will help you become a better business owner.

So how can a business accountant for small business help you?

What Are Tax Accounting Services?

Tax accounting services refer to a set of services provided by accountants, tax professionals, and tax preparation firms that help businesses manage their tax obligations and prepare tax returns. 

These services may include tax planning, compliance, preparation, representation, and tax dispute resolution. 

Tax accounting services aim to minimize tax liabilities and maximize tax savings while ensuring compliance with tax laws and regulations.

What Do These Services Entail for a Small Business?

For a small business, tax accounting services typically involve the following:

  • Tax planning: Identifying tax savings opportunities, making strategic business decisions to minimize tax liabilities.
  • Tax compliance: Ensuring the business follows all relevant tax laws and regulations and filing required tax returns and payments on time.
  • Tax preparation: Preparing and filing federal, state, and local tax returns accurately and efficiently.
  • Record keeping: Helping businesses in keeping accurate records of financial transactions and other tax-relevant information.
  • Tax representation: Representing the small business in dealings with tax authorities and resolving tax disputes.

How Can Small Businesses Benefit From a Professional Tax Accountant?

You can benefit from small business tax accountants in several ways:

  1. Increased efficiency and accuracy: A professional tax accountant has the expertise and experience to prepare and file tax returns accurately and efficiently, reducing the risk of errors and saving time.
  2. Tax savings: An accountant for small business can identify tax savings opportunities, advise on tax-efficient business strategies, and help you take advantage of available tax credits and deductions.
  3. Compliance: A professional tax accountant stays up to date with the latest tax laws and regulations and can ensure you stay in compliance, avoiding penalties and interest charges.
  4. Financial planning and strategy: They can provide valuable insights into your business’s financial performance and offer guidance on how to improve profitability and plan for the future.
  5. Peace of mind: With a tax accountant, you can focus on running your business, knowing that a professional handles your tax obligations.

Can They Offer Advice on How To Reduce a Tax Bill?

A tax accountant can offer advice on how to reduce a tax bill. 

By staying up-to-date with the latest tax laws and regulations and understanding a business’s specific financial situation and tax implications, a tax accountant can provide tailored recommendations to minimize tax liabilities and maximize tax savings. 

It’s important to note that tax accountants do not provide tax planning or advice for evading taxes, which is illegal. Instead, they focus on legitimate tax planning strategies to reduce a tax bill within the bounds of the law.

Can They Help Small Businesses Save Money Long Term?

A tax accountant can help you save money in the long term. By providing guidance on tax-efficient business strategies, identifying tax savings opportunities, and ensuring compliance with tax laws, a tax accountant can help you minimize your tax liabilities and maximize your tax savings over time. 

In addition, a tax accountant can provide valuable insights into your business’s financial performance, including identifying areas for improvement, offering advice on cost-saving measures, and helping the business plan for the future.

What Are Common Mistakes Small Businesses Make With Taxes?

Small businesses often make several common mistakes when it comes to taxes, including:

  • Failing to keep accurate records: Small businesses that do not keep accurate records of financial transactions, expenses, and other tax-relevant information are more likely to make mistakes when preparing tax returns and are at a higher risk of an audit.
  • Not staying up-to-date with tax laws and regulations: Tax laws and regulations can change frequently. Small businesses that do not stay informed about these changes may miss out on tax savings opportunities or fail to comply with tax laws.
  • Improper classification of employees or independent contractors: Small businesses may misclassify employees as independent contractors, which can lead to penalties and fines for failing to withhold and pay the appropriate payroll taxes.
  • Overlooking tax credits and deductions: Small businesses may overlook tax credits and deductions they are entitled to, resulting in a higher tax bill.
  • Failing to file tax returns or pay taxes on time: Late filing of tax returns or failure to pay taxes on time can result in penalties and interest charges.

Do They Often Pay Too Much for Taxes?

Small businesses can sometimes pay too much in taxes for various reasons, such as a lack of knowledge about tax laws and regulations, inadequate record keeping, and failure to take advantage of available tax credits and deductions. 

Small businesses may also pay too much in taxes if they are not properly classifying employees or independent contractors or if they are not using tax-efficient business structures.

Do They Need To Plan for Future Taxes?

Yes, you need to plan for future taxes as a small business owner. 

Tax planning involves anticipating future tax liabilities and making decisions that minimize those liabilities while still complying with tax laws. 

Planning for future taxes can help you stay ahead of tax obligations, avoid unexpected tax bills, and ensure you are taking advantage of all available tax savings opportunities.

For example, you can plan for future taxes by:

  • Setting aside funds to cover tax obligations;
  • Keeping accurate financial records and receipts to support tax returns;
  • Seeking professional tax advice to identify tax-efficient business strategies and minimize tax liabilities;
  • Keeping up-to-date with changes in tax laws and regulations;
  • Reviewing their tax situation regularly to ensure they are on track to meet future tax obligations.

What Should Small Businesses Know About Deductions?

You should be aware of the following information about tax deductions:

  • Eligibility: To be eligible for a tax deduction, a business expense must be considered ordinary and necessary for the business to operate.
  • Timing: Business expenses must be incurred in the tax year for which the deduction is claimed.
  • Documentation: Small businesses must keep accurate records and receipts to support the deduction.
  • Limitations: There are limits on certain deductions, such as entertainment expenses.
  • Available deductions: Some common tax deductions for small businesses include start-up costs, home office expenses, employee benefits, marketing and advertising expenses, and equipment and supply expenses.
  • Professional advice: A tax accountant can advise on which deductions a small business is eligible for and how to maximize tax savings.

Are There Potential Downsides to Using Professional Tax Accounting Services?

There are potential downsides to using professional tax accounting services, including:

  • Cost: Hiring a professional tax accountant can be costly, especially if you operate on a tight budget.
  • Dependence on the accountant: If you rely too heavily on your tax accountant, you may not develop a good understanding of your tax situation, which can make it difficult to manage tax-related decisions independently.
  • Confidentiality: You must provide a tax accountant with sensitive financial information, which can raise privacy and confidentiality concerns.
  • Responsibility for accuracy: Although accountants for small business can advise and help prepare tax returns, you are ultimately responsible for the accuracy of the information provided on tax returns.
  • Potential for conflict: In some cases, the tax accountant’s advice may not align with your goals or preferences, leading to disagreements or disputes.

What Other Services Can Tax Accounting Firms Offer to Small Businesses?

In addition to tax preparation and planning, tax accounting firms can offer a range of services, including:

  • Bookkeeping and accounting;
  • Business consulting;
  • Payroll and benefit services;
  • Estate and trust planning;
  • Audits and dispute handling;
  • Retirement planning.

What Questions Should Small Biz Owners Ask When Hiring a Tax Accountant?

You should ask the following questions when looking to hire a tax accountant:

  • What is your experience with small businesses?
  • How do you stay current on tax laws and regulations?
  • Can you provide references or a list of clients in similar industries?
  • How do you determine the fee for your services?
  • How do you communicate with clients, and how often will I receive updates on my taxes?
  • How do you handle errors or discrepancies in tax returns?
  • Can you assist with bookkeeping and accounting services?
  • Have you ever had any ethical or legal violations?
  • Can you assist with tax planning and strategy for the future?
  • How do you ensure the security and confidentiality of my financial information?

Asking these questions will help you better understand a tax accountant’s experience, expertise, and approach and make an informed decision about who to hire.

Do They Need To Have Experience in a Specific Industry?

It is not necessary for accountants for small business owners to have experience in a specific industry, but it can be helpful. Having experience in a particular industry will provide the tax accountant with an understanding of the unique tax and financial issues that the business may face.

For example, a tax accountant who has experience working with restaurants may have a better understanding of the tax implications of serving alcohol, while a tax accountant who has experience working with retail businesses may have a better understanding of sales tax laws.

In general, it is more important for you to choose a tax accountant who has experience working with businesses similar in size and structure rather than one with specific industry experience. Small business accountants familiar with the tax laws and regulations that apply to small businesses, regardless of industry, can provide valuable advice and support.

Do They Need To Have References?

References can provide valuable information about a tax accountant’s experience, expertise, and quality of service, so you should always request them when interviewing potential candidates.

How Do They Stay Up to Date on the Latest Tax Laws?

Tax accountants for small business typically stay up-to-date on the latest tax laws by attending regular continuing education courses, workshops, and seminars and by subscribing to tax-related publications and newsletters. 

They also consult with professional organizations, such as the American Institute of Certified Public Accountants (AICPA), and use online research tools to access the latest information on tax laws and regulations.

Can They Provide an Estimate Before Committing?

Tax accountants can provide an estimate of the tax liabilities before committing to preparing and filing tax returns. This estimate can be based on the information provided, along with a review of the previous year’s tax returns, if available. 

However, it is important to note that tax laws and regulations are subject to change, and the actual tax liability may differ from the estimate due to new legislation.

How Often Should Small Businesses Consult With a Tax Professional?

You should consult with a tax professional at least once a year, if not more frequently. It is important for you to stay up-to-date on tax laws and regulations that may impact your business and to make sure that your financial records are in order. 

In addition, consulting with a tax professional can help you identify tax-saving opportunities, ensure compliance with tax laws, and minimize the risk of penalties and fines.

It is also a good idea for you to consult with a tax professional before significant transactions, such as mergers, acquisitions, major capital investments, or major business changes.

Need a Tax Accountant?

Think you could benefit from a small business tax accountant? At EvolveCFO, we’re committed to providing small business owners with top-notch accounting services at an affordable price. 

Because our accountants operate virtually, you only pay for the services you need. This keeps it affordable and flexible for you while enjoying up-to-date and accurate tax accounting.

Need to know more? Get in touch with EvolveCFO for the answers to all your small business tax accounting questions and more.