Key Takeaways
- CPAs have the broadest training (accounting, auditing, tax) and can handle complex S-Corps, partnerships, and multi-entity structures. EAs specialize in tax and have the same IRS representation rights.
- Ask about their experience with your specific entity type. Someone who prepares hundreds of S-Corp returns knows nuances a generalist misses.
- Red flags: guarantees specific refunds before seeing documents, charges based on refund size, won’t sign the return, or can’t explain their work clearly.
- Expect S-Corp preparation to cost $1,200-$3,500, partnerships $1,000-$5,000+, and single-member LLCs $500-$2,000.
- A quality preparer provides year-round access, proactive planning recommendations, and explains your return in terms you understand.
Your tax preparer affects more than just your tax bill. The right preparer saves money, reduces stress, and helps you make better business decisions. The wrong fit leads to missed opportunities and compliance headaches that can follow you for years.
After 18+ years of working with business owners, we’ve seen what separates great tax relationships from frustrating ones. This guide covers the credentials to look for, questions to ask, red flags to avoid, and how to evaluate whether a preparer is right for your specific situation.
Table of Contents
Types of Tax Preparers: Know Your Options
Before you start your search, understand what each type of preparer can offer.
Enrolled Agents (EAs)
Enrolled Agents are licensed by the IRS to represent taxpayers. They must pass a comprehensive three-part exam or have prior IRS experience. EAs can handle most individual and business returns and represent you before the IRS.
Best for: Straightforward business returns, IRS representation, and tax controversy matters.
Certified Public Accountants (CPAs)
CPAs are state-licensed professionals who’ve completed education requirements and passed the Uniform CPA Examination. Their training covers accounting, auditing, and tax at a deeper level. CPAs can also provide attestation services like audits and reviews.
Best for: Complex situations, S-Corporations, partnerships, multi-entity structures, and situations requiring financial statement work.
Tax Attorneys
Tax attorneys have a law degree plus tax specialization. They’re best suited for legal tax issues, disputes, and sophisticated planning strategies.
Best for: IRS disputes, complex estate planning, and M&A tax issues.
Unlicensed Preparers
In most states, there are no formal licensing requirements to prepare tax returns. Quality varies significantly among unlicensed preparers, and they can’t represent you before the IRS.
Best for: Very simple returns only.
For a detailed comparison of credentials and when each matters most, see our guide to CPA vs Tax Preparer.
10 Questions to Ask Before Hiring a Tax Preparer
These questions help you evaluate competence, communication style, and fit for your business needs.
Question 1: What are your credentials and how long have you been practicing?
Why it matters: Experience with your specific situation type is more valuable than general experience. Ten years preparing individual returns doesn’t mean expertise in partnership allocations.
Good answer: Specific years of experience, relevant credentials, and examples of similar clients they’ve worked with.
Question 2: What types of businesses do you specialize in?
Why it matters: A preparer who focuses on your entity type will catch opportunities a generalist might miss. Someone who prepares hundreds of S-Corp returns each year knows the nuances better than someone who prepares ten.
Good answer: “We focus on partnerships and S-Corps” or “80% of our clients are service-based businesses.”
Question 3: How do you handle questions throughout the year?
Why it matters: Tax planning happens year-round, not just in April. You need someone who’s available when questions come up.
Good answer: Clear communication policy, response time expectations, and clarity on what’s included versus billed separately.
Question 4: What’s your process for preparing my return?
Why it matters: Understanding the process helps you know what to expect and when. Organized preparers have systems; disorganized ones create stress.
Good answer: Documented process with timelines, review steps, and delivery expectations.
Question 5: How do you stay current on tax law changes?
Why it matters: Tax law changes frequently. The QBI deduction, Section 179 rules, and deadline changes all require ongoing education.
Good answer: Specific continuing education hours, professional memberships, and regular training.
Question 6: Will you represent me if I’m audited?
Why it matters: Not all preparers can represent you before the IRS. If you get an audit notice, you want to know who’s handling it.
Good answer: “Yes, I’m an EA/CPA and audit representation is included” or a clear policy on how representation works.
Question 7: How do you price your services?
Why it matters: Avoid surprise bills by understanding pricing upfront. Some preparers charge by form, others by complexity, others by time.
Good answer: Clear pricing structure with specifics. For more on what CPAs typically charge, see our guide on CPA costs.
Question 8: What information do you need from me, and when?
Why it matters: Organized preparers have clear document requirements and deadlines. If they can’t tell you what they need, that’s a warning sign.
Good answer: Document checklist provided upfront with a clear deadline for submitting materials.
Question 9: Do you offer tax planning, or just preparation?
Why it matters: Preparation looks backward at last year. Planning looks forward and saves money. The best preparers do both.
Good answer: “We include planning recommendations with every return” or a separate planning engagement available.
Question 10: Can you provide references from similar businesses?
Why it matters: Past client experience indicates future service quality.
Good answer: Willing to provide references or testimonials from businesses like yours.
Credentials to Verify
Before hiring anyone to prepare your business tax return, verify their credentials.
| Credential | How to Verify |
|---|---|
| CPA License | State Board of Accountancy website |
| EA Status | IRS Enrolled Agent Status Lookup |
| PTIN | IRS PTIN Directory |
| Insurance | Ask for certificate of professional liability |
| BBB Rating | Better Business Bureau website |
Required for all paid preparers: Every paid preparer must have a PTIN (Preparer Tax Identification Number) that appears on returns they prepare. If someone won’t provide their PTIN, walk away.
Red Flags to Watch For
These warning signs should stop you from hiring a preparer.
Red Flag 1: Fees Based on Refund Size
Legitimate preparers charge based on complexity, not refund amount. Refund-based fees create an incentive for aggressive positions that can come back to hurt you.
Red Flag 2: Won’t Sign the Return
Paid preparers are required to sign returns and include their PTIN. Refusal to sign suggests they’re not confident in their work or are operating outside the rules.
Red Flag 3: Guarantees a Specific Outcome
No preparer can guarantee a refund amount or tax bill before seeing your documents. Promises of specific results before reviewing your situation are a major warning sign.
Red Flag 4: Asks You to Sign a Blank Return
Never sign a return before reviewing it completely. You’re responsible for everything on your return, regardless of who prepared it. Signing blank forms is a recipe for fraud.
Red Flag 5: Can’t Explain Their Work
A good preparer can explain why they made certain choices. If they can’t explain something in terms you understand, they may not understand it themselves.
Red Flag 6: No Written Engagement Letter
Professional preparers document the scope of work, fees, and responsibilities in writing. No engagement letter means unclear expectations and potential disputes later.
Evaluating Fit for Your Specific Situation
Different business structures have different requirements. Here’s what to look for based on your entity type.
If You Have a Partnership or Multi-Member LLC
Look for experience with:
- Form 1065 preparation and filing
- Partner basis tracking and capital account maintenance
- Special allocations and their documentation
- Your specific industry
- Guaranteed payments and their tax treatment
Partnerships are often more complex than S-Corps because of the flexibility in profit and loss allocations. A preparer without partnership experience can create problems that take years to fix.
If You Have an S-Corporation
Look for experience with:
- Reasonable compensation analysis and documentation
- Shareholder health insurance rules for 2%+ owners
- Shareholder basis and distribution rules
- Payroll integration capabilities
- S-Corp election and compliance requirements
If You Operate in Multiple States
Look for experience with:
- State tax compliance across your operating states
- Nexus rules and threshold monitoring
- Apportionment methods (many states now use single-sales-factor)
- Multi-state partnership filing requirements
Multi-state compliance catches many businesses off guard. Revenue exceeding $100,000-$500,000 in a state often triggers filing requirements even without physical presence.
If You Have International Components
Look for experience with:
- Form 5471 for foreign corporations
- Form 8865 for foreign partnerships
- Form 5472 for foreign-owned U.S. entities
- FBAR filing requirements
- Treaty benefits and their application
International tax forms carry severe penalties for non-filing. You need someone who knows these rules, not someone learning on your return.
The Interview Process
Treat finding a tax preparer like hiring any professional service provider.
Step 1: Initial Consultation
Most preparers offer free consultations. Use this time to assess fit, not just to get questions answered. Pay attention to whether they ask about your business or just talk about themselves.
Step 2: Ask Your Questions
Use the questions from this guide. Pay attention to the clarity and completeness of answers. Vague responses suggest vague work.
Step 3: Evaluate Responsiveness
How quickly did they respond to your initial inquiry? How organized was the meeting? First impressions often predict the relationship.
Step 4: Request a Proposal
Get pricing and scope in writing before committing. This protects both sides and sets clear expectations.
Step 5: Check References
Talk to other business owners they’ve worked with. Ask about responsiveness, accuracy, and whether they feel well-served.
Questions to ask yourself after the meeting:
- Did they ask good questions about my business?
- Did they explain things in terms I understood?
- Do they seem genuinely interested in helping me?
- Can I see myself working with this person for years?
When to Switch Preparers
Sometimes the relationship isn’t working. Signs it might be time for a change:
- You can’t reach them when you have questions
- They miss deadlines or file extensions without telling you
- They don’t explain your return or answer questions
- They haven’t suggested any tax planning strategies
- You’ve had the same situation for years but never received proactive advice
- Your business has grown more complex but their service hasn’t evolved
How to Switch Preparers
- Request copies of prior returns (you’re entitled to them)
- Get copies of any workpapers or schedules
- Inform your current preparer professionally
- Provide your new preparer with 3 years of prior returns
What to Expect from a Quality Tax Preparer
A good working relationship includes certain service standards.
During tax season:
- Clear document request with deadline
- Acknowledgment when documents are received
- Draft return for your review before filing
- Explanation of key items and any concerns
- E-filing with confirmation
Throughout the year:
- Available to answer questions within scope
- Proactive about tax law changes affecting you
- Year-end planning recommendations
- Estimated tax payment reminders
Communication standards:
- Responds within 1-2 business days
- Explains things without jargon
- Keeps you informed of deadlines
- Documents advice in writing
Next Steps
Ready to find the right tax preparer for your business?
- Make a list of 3-5 potential preparers
- Schedule consultations with your top choices
- Use the questions in this guide
- Request proposals in writing
- Check credentials and references
- Make your decision
Looking for a CPA who specializes in S-Corps, partnerships, and complex business situations? We’d be happy to discuss whether we’re a good fit for your needs. Schedule a consultation to start the conversation.
Frequently Asked Questions
What credentials should a business tax preparer have?
At minimum, any paid preparer must have a PTIN. For business returns, look for either a CPA license (state-licensed, can provide full accounting services) or EA credential (federally licensed, can represent you before the IRS). Both have ongoing education requirements that help ensure current knowledge.
How much should I expect to pay for business tax preparation?
Costs vary by complexity and entity type. S-Corps typically range from $1,200-$3,500, partnerships from $1,000-$5,000+, and single-member LLCs from $500-$2,000. Learn more about CPA costs.
Is a CPA better than a tax preparer for business taxes?
For complex business situations involving S-Corps, partnerships, multiple states, or international components, a CPA’s broader training often proves valuable. For simpler situations, an EA or experienced preparer may serve you well. The right choice depends on your specific needs. Compare CPA vs Tax Preparer.
How often should I meet with my tax preparer?
At minimum, meet once before tax season to review documents needed and once after to review the completed return. Many businesses benefit from a mid-year planning meeting to discuss estimated taxes and year-end strategies. Regular communication throughout the year helps catch opportunities and avoid surprises.
Can I switch tax preparers mid-year?
Yes. Request copies of your prior returns and any workpapers from your current preparer. Provide these to your new preparer along with information about any tax elections made or planning strategies in place. The transition is usually straightforward.