Accountant for Small Business Taxes: How to Choose

Quick Answer: For small business taxes, look for a CPA, an enrolled agent (EA) or a tax attorney, because those three can represent you before the IRS on any matter, and check the credential in the IRS directory of preparers. Fees depend mostly on your entity type and how clean your books are, so arrive with reconciled year-end statements, a profit and loss report, your 1099s and payroll reports, and last year's return.

Anyone with a Preparer Tax Identification Number (PTIN) can legally charge to prepare a federal return, so "tax accountant" covers a wide range of training. A small business owner needs to know which credential the person holds, what it lets them do if the IRS writes back, and what to bring so the engagement costs less.

CPA, enrolled agent or preparer: what is the difference?

The IRS sorts paid preparers by what they are allowed to do on your behalf after the return is filed. Its page on preparer credentials and qualifications sets it out:

For a business return the practical difference shows up later. If the IRS questions a deduction on your Schedule C or partnership return, a CPA, EA or attorney can deal with the agency for you. A PTIN-only preparer cannot.

Which one to pick depends on the job. An EA's training is entirely tax, which suits sole proprietors, single-member LLCs and owners whose main need is filing and IRS correspondence. A CPA firm is the stronger fit when you also need financial statements a lender will rely on, or year-round accounting alongside the return. A tax attorney is worth paying for when there is a legal problem, such as unfiled years, a dispute or a sale of the business.

How to check a preparer's credential

The IRS runs the Directory of Federal Tax Return Preparers with Credentials and Select Qualifications, linked from the IRS page on choosing a tax professional. It lists CPAs, EAs, attorneys and Annual Filing Season Program participants who hold a current PTIN. If you cannot find someone there, ask for their license number and look it up with the state board of accountancy or the state bar.

The IRS's own Topic 254 on choosing a preparer adds red flags that apply to business owners as much as individuals: avoid anyone who bases fees on a percentage of your refund, who promises a bigger refund than others can get, or who asks you to sign a blank return. A good preparer asks to see your records and asks questions about them.

What does small business tax preparation cost, and why does it vary?

No official fee schedule exists, and published surveys mix very different jobs, so ask for a written quote rather than trusting an average. What moves the price:

• Entity type. A Schedule C on a personal return is the simplest. A partnership (Form 1065) or S corporation (Form 1120-S) return is a separate return with K-1s for each owner, and usually costs more on top of your personal return.
• State of the books. This is the factor you control. A preparer who gets a reconciled profit and loss report spends their time on tax. One who gets a shoebox spends it on bookkeeping at tax-season rates, and often bills it separately.
• Number of states. Sales, employees or property in another state can add filings.
• Payroll and contractors. Reviewing payroll reports and checking that 1099-NECs went out takes time.
• Asset purchases. Vehicles, equipment and property need depreciation schedules.
• Prior-year problems. Amending a return or catching up unfiled years is priced as its own project.

Many firms quote a fixed fee per return once they have seen last year's return and your books. Hourly billing is more common for advisory work and IRS correspondence. Ask which applies and what triggers extra charges. Get the answer in an engagement letter that names the returns covered, the tax year, what you must supply and by when, and whether notices and amended returns are inside the fee or billed on top. A clear letter is also how you compare two quotes fairly, because one firm's lower number often leaves out the state return or the K-1s.

Questions worth asking before you hire

1. Which credential do you hold, and are you in the IRS directory or with which state board?
2. How many returns like mine (same entity type, same industry) do you prepare each year?
3. Is your fee fixed per return or hourly, and what would cause it to change?
4. Who will actually prepare the return: you, or staff you supervise?
5. Will you represent me if the IRS or the state sends a notice, and is that included?
6. Do you also do bookkeeping or quarterly estimates, or only the annual return?
7. How do you want documents delivered, and what is your deadline for receiving them?
8. Are you available after the filing season to answer questions?

The last question echoes an IRS tip: consider whether the person will still be around months or years after the return is filed. A business return can draw questions long after April.

The document pack to bring

The more of this arrives organized, the less of your fee goes to sorting. A clean starting set:

• Bank and credit card statements for every business account, January through December, with the December ending balances matching your books. Our year-end bank statement tax checklist lists what to confirm on each.
• A profit and loss statement and balance sheet from your accounting software or spreadsheet, with transactions categorized.
• Forms 1099 you received (1099-NEC, 1099-K, 1099-MISC, 1099-INT) and a list of 1099s you issued to contractors.
• Payroll reports: year-end W-2 and W-3 summaries and the quarterly Form 941 filings, or your payroll provider's annual summary.
• Asset records: invoices for equipment, vehicles or property bought or sold during the year.
• Loan statements showing interest paid, since principal is not deductible.
• Estimated tax payments made during the year, with dates and amounts.
• Last year's return, business and personal, and any IRS or state letters received.

If your books are not reconciled, do that before the appointment or tell the preparer up front. Many owners have the statements only as PDFs; converting them to rows in a spreadsheet makes categorizing a year of activity faster. QuickBankConvert does that for bank and card statements, and the small business tax prep guide covers how to organize the result by category.

Do you need a tax accountant at all?

Not every business does. A sole proprietor with one bank account, no employees, no inventory and no asset purchases can often file with consumer tax software and a well-kept self-employed tax spreadsheet. The case for a professional grows with each of these: a partnership or S corporation, payroll, more than one state, significant equipment purchases, a year with a big change (starting, selling, or switching entity type), or any letter from the IRS you do not understand.

Hiring a tax accountant also does not replace bookkeeping. The accountant works from your records; if you need someone to keep those records during the year, that is a separate service, compared in bookkeeping services for small business.

Related guides

• Bookkeeping vs accounting: which one you need
• Estimating tax with W-2 and 1099 income
• Catch-up bookkeeping before tax season