Congratulations on running a business and living your dream! It certainly involves a lot of sweat and tears, but you’re making it happen…serving your customers and earning good money.
And now that tax time is here (ready or not mid-April is coming!), you’re facing a lot of additional work. A good small business tax accountant could be a game-changer right about now!
This post will give you everything you need to know about choosing the right one.
Small Business Tax Accountants
Small business tax accountants are tax professionals who help business owners with their company’s finances. These folks are usually CPAs (Certified Public Accountants) who can assist with taxes as well as a wide range of additional financial needs. Still, some may be individuals who simply focus on tax preparation and filing.
A note of caution here: pay attention to who you’re hiring to do your taxes. This time of year, lots of naive business owners get taken by scam artists or “fly-by-night” overseas accountants looking to make a cheap buck without much accuracy or accountability. (Read more in another post recently on “How a Good CPA Makes Your Small Business Tax Preparation Easier.”)
We recommend doing business with a reputable local CPA whenever possible. (And not just because we are one!) The peace of mind you gain from face-to-face accountability and the value of knowing who handles your financial records are worth it!
Here are 5 quick reasons to hire a good CPA to be your small business tax accountant:
- Tax laws are constantly changing and can be tough to navigate.
- Doing your own taxes can increase your chances of an IRS audit…because in their experience, DIY tends to lead to more mistakes (and opportunities to cheat.)
- The overall financial health of your business improves when there’s a pro keeping an eye on your money.
- A CPA does a lot more than taxes, so when you need help with payroll, strategic business planning, or cash flow management (to name just a few of the services we offer) you’ll already have that trusted relationship in place.
- You aren’t a CPA, and that’s okay. You’ve got enough on your plate when it comes to growing your business. Partner with someone who does numbers for a living so you can focus on doing what you do best.
(Read more in a post we did on the subject: “5 Reasons That You Should Hire a CPA.”)
How to File Taxes As a Small Business Owner
Every company that brings in revenue is required to report business income to the IRS each year. (When and how depends on your business structure…more on that in a minute.) In those tax returns, owners make adjustments for tax deductions based on qualified business expenses, take advantage of tax credits, and pay the tax that is due.
As you get ready to file your taxes, you’ll be responsible for the following things:
- Income Tax – On a federal level, the IRS will tax a portion of every dollar of profit you made in the past year, so you’ll need to be able to accurately report all revenue. Each state has its own tax laws, so check to make sure you aren’t required to file a state income tax return as well.
- Self-employment Tax – Since you aren’t a traditional W-2 employee, you are responsible for paying your own Social Security and Medicare taxes when you own a business.
- Employment Taxes – If you have employees, you’ve been paying your part of their Social Security and Medicare taxes along with income tax withholdings and unemployment insurance with each paycheck they’ve received.
- Estimated Taxes – These are the quarterly payments you send to the IRS throughout the year based on what you expect your revenues to be. If you overpay or underpay, the difference will be accounted for when you file your return at the end of the year.
Other Items: In certain industries, you may also be responsible for paying excise taxes. If that applies to you, you probably already know about it. Just make sure your CPA does too. Also, be sure they have your Employer Identification Number (EIN) correct on all of the forms you’ll be sending in.
As for the process of filing your small business taxes, here’s what you need to have in order:
- Understand your business structure. What forms you use and when your taxes are due depend largely on what type of business you have:
- Sole Proprietorship or LLC – You file business revenue/losses on Schedule C of your personal 1040.
- Partnership – The company files an information return using Form 1065; you report your portion of profits on your personal 1040.
- Corporation – The company files its own tax return using Form 1120. As an owner/member, you report any disbursements made to you on your individual 1040.
- Sole Proprietorship or LLC – You file business revenue/losses on Schedule C of your personal 1040.
- Have your documents in order. The better prepared you are with revenue records, expense receipts, etc. the easier the process will be for you and your CPA. (Hint: the less time they have to spend on your return, the less it will cost you as well.)
If those two things are clear, your CPA will be in a much better position to help you file an accurate return and take advantage of all kinds of deductions that can significantly lower your overall tax burden. With added credits and incentives, they may be able to keep you from having to pay anything extra at all! You might even get money back from the government. Wouldn’t that be nice for a change!
(For more ways to prepare for filing your taxes, take a look at this post we just did on “6 Top Tips For Filing Your Small Business Taxes The First Time.”)
How to Choose the Right Small Business Tax Accountant
Choosing the right small business tax accountant is an important decision. You’re not just picking a vendor to supply the cheapest parts or hiring a contractor to for something just anyone could do. You’re getting into a relationship with someone who has access to your financial records and some very sensitive information about you and your company.
Since you can’t afford to mess this decision up, here are some pointers:
- Don’t fall for the trap of thinking you don’t need anyone. Many small business owners think 1) they aren’t big enough for an outside accountant or 2) they can handle it themselves. Both are traps that can cost you in the long run.
Tax codes are constantly changing, and there are lots of opportunities to make mistakes or overlook valuable deductions/credits if you don’t stay on top of things. It’s unlikely that anyone is truly able to run their business well and be a tax expert at the same time. Hire a pro, and thank yourself later. - Look for certifications. When you do decide to hire someone, don’t just pick the first person that Google shows you. Take the time to investigate and make sure that you’re getting someone who knows what they’re doing and can benefit your business.
The American Institute of CPAs has a tool on its website that allows you to find a licensed CPA in your area. (Of course, we can quickly recommend one that you can schedule a call with today.) - Ask for references. Check with people who have done business with them in the past. Ask lots of questions.
- Interview them. A good one will have just as many questions about your business as you do about their services and qualifications. If they don’t, move on to someone else.
- Expect them to be involved. In order to get the most out of whoever is handling your accounting, they need to be involved in your business more than just at tax time. By getting to know you and your business on a weekly, monthly, or quarterly basis, they can really help you minimize financial errors and maximize operational efficiency.
Business Tax Accountants You Can Count On
Filing business taxes doesn’t have to be complicated. Our team of tax prep pros has been serving small business owners just like you for over 40 years now. We’ve got 6 locations across West Tennessee (Jackson, Dyersburg, Paris, Brownsville, Martin, Milan, near the new Blue Oval City), so we’ve got someone near you ready to help…or work with us remotely if that’s easier.
However you connect with us, you’ll be getting business tax accountants you can count on. Schedule a call today to get started!
