Help! What to Do When You Need to Change Accounting Partners During Tax Season

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When a tax filing deadline is looming for your business, it would seem the worst possible time to think about changing accounting partners, right? Maybe not.

Despite your due diligence in choosing an accounting and tax partner, you might come to the realization that the provider you’ve been using for tax services isn’t up to the task. Rather than enter another tax season with a provider that isn’t serving you well, the right approach can help you move onto a partner that’s better suited to your needs, while avoiding the risk of missing a filing deadline, calculating your tax liability incorrectly, or experiencing other errors that your business simply can’t afford.  

Know When it’s Time to Change Accounting Providers

Tax filing season is an overwhelming time for many small businesses. Even when you use an external tax return preparer, your internal staff will end up busy updating financial records, compiling financial statements, and gathering information needed to ensure a timely, accurate tax filing. 

In the midst of all the activity that happens in anticipation of the upcoming filing deadlines, the idea of switching tax preparers may seem daunting. Even if you don’t feel your previous tax services provider can handle the task correctly and in a timely way, you might be tempted to just muddle through the current tax season rather than try to find a new tax accountant right now. 

But getting your taxes right is too important to keep moving forward with a provider that isn’t meeting your needs. That’s why reasons like the following should trigger you to think about making the move sooner rather than later. 

  • You’ve experienced tax mistakes or have missed tax deadlines in the past, resulting in late filing penalties and interest or the added costs associated with filing an amended return.  
  • Your previous accounting provider didn’t fully capitalize on tax credits you may be eligible for, such as the R&D tax credit, small business health care tax credit, or the electric vehicle tax credit.
  • You’ve tried to handle all your accounting internally and found it overwhelming alongside your leadership role, or you’ve used a bookkeeper with very limited experience and now your business has grown more complex or is subject to new tax regulations (for example, you’ve recently added locations in other states, you’re at least 25% foreign-owned and subject to new filing requirements, or you’re trading in cryptocurrency, such as bitcoin).
  • You’ve outgrown the capabilities of your previous tax services provider—for example, you’re looking for someone who can go beyond filing your returns properly and offer proactive advice on how to reduce your tax liability.
  • You’re uncomfortable with your previous tax accountant for any reason—perhaps they’ve failed to be responsive, they haven’t communicated in a clear or timely way, or worse, you suspect preparer negligence.

Switching Tax Services Providers Seamlessly

If you decide it’s time to switch tax services partners, but you’re concerned about potential delays or disruptions this tax season, there are several steps you can take to make the move more seamless, efficient, and effective.

  1. Don’t panic! A methodical approach can help you navigate a change in tax services providers without incurring additional costs or tying up your staff unnecessarily. The key is to be decisive, then move forward.
  2. Check that your company hasn’t already signed an engagement letter with your previous tax accountant for the 2021 tax season. Most bookkeepers, accounting firms, and other tax preparers send out annual engagement letters early in the calendar year.
  3. Consider filing an extension for your 2021 return, whether you file it yourself or ask your new provider to handle it. If you don’t think you can make the filing deadline (March 15 for an S corporation or LLC; April 15 for a C corporation), requesting an extension is a prudent strategy because it gives you an additional six months to file. But it doesn’t absolve you of paying your tax liability on time. To avoid late payment penalties and interest, you must pay 100% of your previous year’s tax liability or 90% of your current year tax liability by the original tax filing deadline, even if you file an extension.      
  4. Begin looking for a new accounting provider as soon as possible. Check that your new partner has strong credentials (such as CPAs and experience working with other businesses with your legal structure); can provide proactive tax advice; is able to represent your company in the event of an audit; and can provide solid references from current clients (or, alternatively, you can find positive reviews online). Ask for details on their fee structure, confirming whether their tax preparation pricing is all-inclusive or if you could be hit with surprise add-ons (which have the potential to double or triple your tax preparation bill). And don’t underestimate the “personality test”: People do business with people they like and choosing an accounting partner should be no different.  
  5. Provide your new tax services partner with your previous year’s tax return as soon as possible. They’ll be able to extract critical data from this document, which will speed up the process of filing an extension and getting your 2021 tax return underway.
  6. Be prepared to respond quickly with any other documentation your new tax accountant needs, such as tax returns from earlier years, current financial statements, information on any assets sold or disposed of during the tax year, your capitalization table, and details on any changes in ownership or partnership, for example.
  7. Once the immediate concern of your 2021 tax return is behind you, consider having your new accounting partner review your tax returns from the past few years. They can determine if your returns are accurate or if there are any errors or omissions that warrant filing an amended return. It’s also prudent to get ahead of your 2022 taxes by getting your tax planning ducks in a row now. A quarterly review with your new tax accountant is a great way to ensure your company is in the best tax position by asking questions about whether you’re making the appropriate estimated quarterly tax payments, what steps you can take to reduce your tax liability, and how to budget for the taxes you’ll owe based on the current year’s financial results. 

If you’ve decided that it’s in your best interest to switch tax services providers, Simple Startup may be just the right choice for your business! Whether you only need help with tax preparation, filing, and advisory services, or you could benefit from the comprehensive services of an outsourced team of accounting and finance specialists, Simple Startup has the credentials, resources, and experience to help. 

Need help with your 2021 taxes on a tight timeline? Book a call with Simple Startup and find out how our tax and accounting specialists can assist!

And as you look ahead, don’t forget to make note of key tax dates for 2022 to avoid late filings or payments and the associated penalties.  

About Bert Wilson

Bert is a serial entrepreneur, finance expert and tax extraordinaire. He has started multiple successful business ventures ranging from control room and furniture sales to real estate investments to movie theater operation. Due to the accounting complexity of dealing with such diverse ventures, he went back to school, earned his Master’s degree in accounting, and then passed the CPA exam, becoming a licensed Certified Public Accountant who could deal with it all himself. Bert is super passionate about using his incredible experience to help other entrepreneurs succeed.

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