10 Questions You Should be Prepared to Answer for a New Client

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In today's issue of Ask TaxMama, I have updated an article from many years ago about why a business needs a tax professional. Page 2 of the article included these guidelines to small businesses looking for a tax pro:

1. Does the Tax Pro have the expertise you specifically need? Don’t waste the candidate’s time–or yours–asking about experience s/he may have in fields or areas that aren’t related to your particular business (e.g., If you are a building contractor, or developer, what do you care if the Tax Pro knows the entertainment industry?). Hearing stories may be entertaining, but telling them isn’t necessarily productive.

2. Make a list of questions specific to your enterprise (e.g., You are a trucker –does this person know highway use taxes or the IRS’s allowed per diem rates for transportation workers?).

3. Does the candidate have a degree? (In what? Archaeology? Not very helpful, although we Tax Pros do have to dig.) It would also help if s/he has some understanding of fundamental bookkeeping functions–like the difference between loans and expenses. You’d be amazed at how many tax preparers don’t know how to do a balance sheet or income statement, or even a checkbook!

4. How much experience does s/he have in the industries or areas you care about? I just watched a new Enrolled Agent (an individual licensed by the U.S. Treasury to prepare income tax returns) meticulously prepare tax returns that were technically correct in every way. However, when the same documents were prepared by a more senior agent with industry expertise, client insight, and more practical tax preparation experience, the tax liability was cut in half–and the return was still totally legal.)

5. How much tax audit experience do they have? (This is a trick question. If they brag about how many audits they’ve handled or how good their results are, ask an additional question: How many of the audits were on returns you prepared?) If a Tax Pro’s clients get audited frequently, there is either something wrong with their work OR their clients are in industries targeted by the IRS. Personally, I’d be more comfortable with a Tax Pro who knows how to prepare returns that don’t attract IRS attention.

6. Are they open year-round? Five days a week? If they close frequently, who’s available to cover for them when they’re gone?

7. If they make mistakes, do they fix the return for free? Do they pay any penalties generated by those mistakes? (Don’t ask them to pay your taxes–those would have been due anyway. And don’t expect them to pay your interest – you had the use of the money for that time period.) Do they even know how to amend returns? File corrections?

8. How long has their average client (non-family member) been with them? Can they provide references you can call or visit? (If the Tax Pro has been in business for ten years, why does the average client only stick around for two years?)

9. In addition to tax preparation, can you call them during the year to get planning advice? Retirement planning? Tax reduction ideas? Savings and budgeting assistance? Buying a home? Setting up new businesses or formats (corporations, LLCs, partnerships)?

10. Can they advise you or help you with the operational aspect of your business? (Do they have contacts in your industry? Can they help you network? Are any of their clients successful at least partly because the Tax Pro has helped them succeed?)

Are you prepared to answer those questions? 
Are there other questions you think they should be asking?


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