A quick glance at the Internal Revenue Service’s various tax forms, schedules and publications may leave you scratching your head. Few people will dispute that tax law can be complicated.
As a business owner, you have plenty of decisions to make when it comes to tax preparation and accounting. Among them: Do you need a tax attorney, a certified public accountant — or both — and just how do you select them?
Jason Griffith, managing partner at the local CPA and consulting firm of De Joya Griffith & Co., says business operators who opt to seek help from an accountant are making a wise choice.
“Anyone who is in business needs one,” he said. “As a start-up, or even an existing business, there seems to be an infinite number of items to worry about. What price do I charge? What expenses can I cut? When do I hire new employees? The questions never end.
“Hiring an accountant should be done very early on in the process. Every hour of every day is precious when you are a business owner, so using that time wisely is well served. Even the one-person business start-up should start the process of getting their accounting records in order and having a third party help them get this organized.”
A useful tool in searching for an accountant is the American Institute of CPAs’ website at www.AICPA.org, which includes peer reviews. The public can view license status and complaints against accountants on the Nevada State Board of Accountancy’s website at www.nvaccountancy.com.
Dianna Russo, managing partner at the CPA firm of Houldsworth, Russo & Co., emphasized that it was important to have an accountant in place before problems arise.
“If you’ve been doing your taxes yourself and all of a sudden the IRS picks you for an audit and you want to have representation, the professional you pick will not know what you do and will need to spend time getting to know you and your business. If they have been working with you all along, it will be a lot easier for them to represent you.”
Russo also points out that selecting an accountant goes beyond the number crunching. Choosing someone who can be a benefit for the long run is important too.
“We have had businesses for years that never had interaction with the IRS,” Russo said. “The ones that have had, we have been able to be their representative.
“The key to this is to make sure that the person preparing your return is registered to represent you to the IRS. All CPAs and EAs (enrolled agents) have this, but if someone just says they prepare taxes with no designation, they won’t be able to represent you.”
Griffith stresses that the work an accountant can do for a business is seemingly endless.
“Accountants are perfect for the role on an advisory board,” he said. “Their fee is likely a lot less than you would think. It will make any conversation with a bank, or shareholder, more comforting if they know you have a CPA on the advisory board. And, as long as you set the expectations for them of what you are looking for, they can help you with new clients, be door openers to other companies, negotiate with vendors and so much more.”
Accountants and tax attorneys often work closely for you as a business owner, and that’s quite beneficial in the long run.
“I like to get the accountant involved,” said attorney Bob Anderson, a shareholder with the firm of Holland & Hart, who has practiced tax law in Las Vegas for more than three decades. “I work very closely with accountants and have a great respect for them. It’s a team approach.”
As far as tax attorneys go, business operators often don’t think of calling them unless there’s trouble. But there are proactive reasons to call them, too. It’s worth remembering that the job of a tax attorney is often to save their clients money, and they’re trained to familiarize themselves with the tax codes and minimize business owners’ tax liability.
As with accountants, key factors in choosing a tax attorney include reputation, experience and cost; word of mouth goes a long way, as well.
Such resources as lawyers.com, avvo.com and the Martindale-Hubble peer review ratings can be helpful in identifying the best of the bunch in your area, too. Those peer review ratings are an objective indicator of a lawyer’s high ethical standards and professional ability, generated from evaluations of lawyers by other members of the bar and the judiciary in the United States and Canada.
Another resource to consider is the State Bar of Nevada’s website at www.NVbar.org. The site includes information about disciplinary actions involving attorneys, but does not include pending discipline cases.
But Anderson said a step every business operator should take is a face-to-face discussion with a prospective attorney.
“Meet with the lawyer,” he said. “No lawyer should charge for that initial consultation. See where they are coming from. You have to be comfortable talking with your attorney. Call a business associate, too, and ask who they use.”
After you’ve selected a lawyer, you’ll need to decide how often you’ll need to consult them. Some business will utilize attorneys only for specific projects, while others may establish a full-time relationship to rest easier at night knowing advice is only a phone call or an email away.
“Any business of any significant size ought to have a tax lawyer accessible to them,” said Anderson, who is also the president of the Southern Nevada chapter of the Nevada Society of Certified Public Accountants. “If I have a continuing relationship with a client, he can call me with a question that may only will take a couple of minutes to answer. I’m not going to be billing him for those phone calls. I may tell him that his issue in question isn’t a problem and don’t worry about it. Or I may say, ‘Oh that may be a problem. Let’s meet.
“It’s kind of like your primary care physician. He knows your health history. You want your tax attorney to know your business history.”
Michelle Ferreira, a shareholder with the law firm of Greenberg Traurig who practices tax law out of its San Francisco office, points out another good reason to maintain a relationship with a tax lawyer.
“Tax attorneys are essential when there are questions about taking a certain filing position over another, when the law is uncertain and unsettled,” Ferreira said. “In fact, a business that gets tax advice from an attorney is likely to insulate the business from penalties, if asserted by a state or federal taxing agency.”
It isn’t always a best practice to wait until you’re in hot water with the IRS before lining up the representation of a tax attorney. But some of that depends on the industry your business falls under.
“For instance, a mom-and-pop dry cleaners probably isn’t going to have any significant tax issues,” Anderson said. “But a business that’s active in transactions and is buying and selling businesses, or one that has a lot of assets probably needs one. As the dollar size of transactions grow, the need for tax advice grows as well. The risk is simply higher.”