How to Choose a Tax Preparer for Your Small Business: Questions to Ask Before You Hire
Anyone can legally prepare a tax return for pay as long as they have a PTIN — a preparer tax identification number that takes about ten minutes to get online.
No exam, no continuing education, no oversight requirement in most states. That's not a reason to panic, but it is why "they seemed nice and their fee was low" isn't a qualification. If you're choosing a tax preparer for your small business, here are the questions worth asking before you hand over your financial records — and what the answers actually tell you.
Why this matters more for a business return than a personal one
A personal Form 1040 with a W-2 and a mortgage deduction is fairly forgiving of a mediocre preparer. A small business return isn't: entity elections, depreciation methods, payroll compliance, and multi-state issues all compound over time, and a mistake this year can mean a costly amended return — or a costly missed deduction — for years after. It's worth spending fifteen minutes vetting whoever you're about to trust with that.
10 questions to ask before you hire a tax preparer
1. Do you have a PTIN, and will it be on my return? This is non-negotiable. The IRS requires every paid preparer to have a valid PTIN and to sign returns they prepare. If someone offers to prepare your return "under the table" without signing it — sometimes called a "ghost preparer" — that's a serious red flag, not a discount.
2. What credentials do you hold, and what does that mean for my business? "Tax preparer" isn't one licensed profession — it's an umbrella term. CPAs, enrolled agents (EAs), and attorneys hold unlimited representation rights before the IRS, meaning they can represent you in an audit, appeals case, or collections matter regardless of who prepared the return. Preparers who've completed the IRS's Annual Filing Season Program have limited representation rights — only for returns they personally prepared and signed. Preparers with no credential and no AFSP record generally can't represent you before the IRS at all. None of this means an uncredentialed preparer can't do competent, accurate work — plenty do — but you should know what you're getting.
3. Can you represent me if the IRS has questions about my return? A direct follow-up to #2. If your preparer can't sit across from the IRS on your behalf, find out now who would — not during an audit.
4. How do you calculate your fee? Flat fee, hourly, or fee-by-form are all normal. A fee based on the size of your refund is not — the IRS specifically calls this out as a red flag, because it creates an incentive to take aggressive positions that increase your audit risk.
5. Will you e-file my return, and who's responsible if something's wrong? Nearly all legitimate preparers e-file. Ask what happens if an error is discovered later — do they correct it at no charge, and do they carry professional liability insurance?
6. Have you worked with businesses like mine before? An entity structure, industry, or state-filing situation similar to yours matters more than years in practice alone. A preparer who mostly does individual returns may not be the right fit for a multi-member LLC or a business with inventory.
7. Will I see the return before it's filed, and will you explain it to me? You're legally responsible for everything on your return, even if someone else prepared it. Never sign a blank or incomplete return, and be wary of anyone rushing you past the review.
8. Where does my refund actually go? Refunds should deposit directly into your account — never the preparer's. Double-check the routing and account numbers on the completed return before it's filed.
9. Are you available after the filing deadline? IRS notices, state notices, and follow-up questions don't stop in April. Ask whether your preparer is reachable year-round or effectively disappears until next season.
10. Can I check your history? CPAs and attorneys can be verified through their state licensing board; enrolled agents and other preparers can be checked through the IRS's public directory of credentialed preparers and the IRS Office of Professional Responsibility for any disciplinary history.
CPA vs. EA vs. uncredentialed preparer: the quick version
| Credential Source | Can Represent You in an Audit? | Typical Strength | |
|---|---|---|---|
| CPA | State licensing board | Yes, unlimited | Broader financial/accounting scope, good for complex entities |
| Enrolled Agent (EA) | IRS (federal license) | Yes, unlimited | Tax-focused specialization, works across all states |
| Attorney | State bar | Yes, unlimited | Best for legal disputes, complex structuring |
| AFSP preparer | IRS voluntary program | Limited — only returns they prepared | Often lower cost, seasonal |
| Uncredentialed, no AFSP | PTIN only | No | Wide range in quality — vet carefully |
Red flags that should end the conversation
- Charging a fee based on your refund amount
- Promising a refund before looking at your documents
- Asking you to sign a blank or incomplete return
- No PTIN, or refusal to sign the return at all
- Pressure to deposit your refund into their account "for convenience"
- No way to reach them after your return is filed
Ready to work with a preparer who can answer all ten?
We'd rather you ask us these questions directly than take our word for it. Schedule a free consultation with Taxvanta and see how we handle tax planning and preparation for small business owners.
Frequently Asked Questions
How do I know if a tax preparer is legitimate?
Ask for their PTIN, verify it's on your finished return, and check whether they hold a CPA, EA, or attorney credential through the relevant licensing board or the IRS's preparer directory.
Do I need a CPA for my small business, or is a tax preparer enough?
It depends on complexity. A straightforward sole proprietorship may be well-served by any competent, credentialed preparer. Multi-member entities, multi-state operations, or anything likely to draw IRS scrutiny benefit from a CPA or EA with unlimited representation rights.
What's the difference between a CPA and an enrolled agent for tax purposes?
Both hold unlimited representation rights before the IRS. CPAs are licensed at the state level and often cover broader accounting services; EAs are federally licensed specifically in taxation and aren't restricted by state lines.
Is it a red flag if a preparer's fee is based on my refund size?
Yes. The IRS specifically warns against this practice because it can incentivize a preparer to take aggressive, inaccurate positions to inflate your refund — positions you're on the hook for if they're wrong.
Can an uncredentialed tax preparer still do a good job?
Often, yes — credentials aren't the only measure of competence. But without a CPA, EA, or attorney credential (or at least an AFSP record), they generally can't represent you if the IRS has questions about the return they prepared.
Taxvanta provides tax planning and tax preparation for small business owners and military/veteran clients. Every return we prepare carries our PTIN and our signature — ask us about our credentials and how we can represent you if the IRS ever has questions. Reach us at scott@taxvanta.com or (910) 360-8041.
This article is for general informational purposes and isn't a substitute for advice tailored to your specific situation.