Staying tax compliant is challenging, but failing to do so triggers penalties, audits, and costs that quickly compound. Smart tax planning is also vital to legally minimize expenses and maximize after-tax profits.
Yet few business leaders can dedicate the time to fully master complex and constantly changing tax codes. This is where a trusted tax consultant earns their keep through specialized expertise combined with a big picture view of how taxes impact your company’s bottom line.
This comprehensive guide examines the key duties tax consultants handle, top reasons to hire one, criteria for choosing the right fit, optimal timing, and pro tips to maximize the ROI of your tax support.
Core Responsibilities: What Does a Tax Consultant Do?
At a high level, a tax consultant’s role is to serve as an expert extension of your team, allowing you to offload the heavy lifting of tax compliance and planning.
Key responsibilities include:
Tax Planning, Filing & Payment Support
- Suggests proactive planning ideas to legally reduce tax bills
- Prepares federal, state, payroll and sales tax returns
- Models tax impact of major business decisions in advance
- Implements accounting methods to optimize after-tax profits
Research Guidance on Tax Laws & Rules
- Closely monitors updates to IRS codes and publishes guidance
- Reads latest case law to understand trends in IRS enforcement
- Confers directly with IRS for clarification on ambiguous issues
Audit Support & Dispute Resolution
- Handles all correspondence and meetings during IRS audits
- Prepares detailed responses to document positions
- Negotiates settlements or files appeals to achieve best outcome
Advisory on Transactions & Investments
- Vets deal terms and structure from a tax efficiency lens
- Quantifies tax liabilities of M&A, expansion opportunities
- Outlines tax considerations to inform decisions
Tax Planning, Analysis & Projections
- Prepares estimated payments and secures filing extensions
- Runs scenarios to compare options and model outcomes
- Analyzes data to highlight planning opportunities
This blend of tactical filing assistance and strategic insights on past, present and future tax trajectories is incredibly valuable. It’s expertise few companies can replicate internally.
5 Benefits of Hiring a Tax Pro
Beyond core compliance assistance, a tax consultant provides immense value through:
1. Preventing Costly Errors
With tax rule complexity, missteps are common without guidance. A tax pro helps avoid notices and penalties through correct filings.
2. Uncovering Tax Savings
An experienced consultant uses their expertise to identify deductions and credits you may overlook. Their guidance leads to substantial tax savings – often exceeding their professional fees.
3. Resolving Complex Tax Issues
For global activities, large deals, and intricate investments, a tax expert gives guidance on specialized needs and implications. This allows you to execute transactions smoothly.
4. Added Security During Audits
If facing an IRS inquiry, a tax pro represents your interests to resolve the examination efficiently. Their expertise often leads to faster closure with little extra tax due.
5. An Informed Strategy Sounding Board
A tax consultant does more than compliance. They advise on tax outcomes of decisions under consideration – a key voice to inform future moves.
For most companies, partnering with a tax pro pays dividends through tax savings, informed strategy, and confidence in full compliance.
How to Choose the Right Tax Consultant
Vet potential tax experts thoroughly – the ideal consultant will be well-versed in your specific business needs. Key criteria include:
Relevant Industry Experience
- Seek consultants with extensive background serving clients in your sector
- Familiarity with common issues and transactions is invaluable
Clear Communication Skills
- They should explain technical topics clearly without over-using complex jargon
- Ensure their style aligns well with your preferences
Track Record Handling IRS Exams
- Look for a strong history representing clients under IRS audit
- Experience negotiating directly with agents is extremely helpful
Commitment to Continuing Tax Education
- Ongoing training on latest tax codes is vital
- Ask about their annual learning regimen
Reasonable Billing Rates & Fees
- Compare project and hourly fees to find fair market value pricing
- The tax savings a strong consultant provides will offset much of the cost
Take time upfront to thoroughly evaluate 3-5 top candidates. Be sure to check references to confirm capabilities and responsiveness.
When Should You Hire a Tax Consultant?
Most small businesses wait too long. Common triggers that prompt bringing a consultant onboard include:
- Launching a startup
- Entering new geographic markets
- Considering major transactions
- Facing an unexpected IRS audit
- Crossing $10 million in annual revenues
But the best time is actually before major changes occur – this allows proactive planning and advice from the start. Be strategic and consult a tax pro early in growth phases.
Conclusion
Managing taxes with rising complexity and high compliance stakes is tricky without the right expertise. A tax consultant serves as an invaluable asset to drive tax minimization while avoiding penalties.
They expand your capacity and capabilities by taking on intensive compliance work. Their specialized knowledge also uncovers substantial savings through smart planning.
If your business currently handles taxes in-house without a true tax expert, make hiring an advisor a priority. The ROI can be massive thanks to tax reduction and informed growth strategies.
FAQs
Seek out an Enrolled Agent (EA) or Certified Public Accountant (CPA) – these require extensive testing on planning, compliance, ethics. Verify active licenses to validate qualifications.
Provide recent tax returns, current financial statements, bank records, sales data, payroll info, relevant contracts, and transaction details. Organize records for efficiency.
If launching a company or exceeding $500K in revenue, a consultant is strongly advised. But even earlier-stage businesses can benefit from guidance on available credits, deductions, accounting methods and compliance particulars.
