Small business tax preparation is a big deal this time of year. As busy business owners scramble to get their tax documents together and say goodbye to last year, accountants everywhere are sharpening their pencils and getting ready to go.
Taxes are complicated, especially for small business owners. And they can be a pain to do yourself!
In this post, we’ll let you know what your options are when it comes to small business tax preparation so you can be prepared and confident this year.
Small Business Tax Preparation
There was a time when you could do your taxes by yourself. That was probably when you were just starting and didn’t have much income to report anyway.
As your business has grown, however, so has the difficulty level of filing your taxes with the IRS each year. Multiple sources of revenue, working with independent contractors, and a variety of expenses all contribute to the mess.
If you’re like most small business owners, you require a little bit of help to make sure your returns are filed accurately and on time. After all, unless you run an accounting firm, you got into business to do business…not file taxes all day.
When it comes to filing your taxes, you have several options:
- Do it yourself.
- Use guided software.
- Hire a full-time accountant.
- Partner with a tax professional.
As we mentioned, option 1 (doing it yourself with old-fashioned pen and paper) is probably the most difficult and most stressful at this stage of your growth. Using software (option 2) can help, but if your business involves more than the most basic elements of a tax return it may not be what you really need.
(The IRS has created a helpful virtual small business tax workshop if you are interested in learning more about what is involved in filing your federal taxes yourself.)
Many larger companies have full-time in-house accountants on their payroll who are able to take care of all of their tax filing needs. If you are able to bring on a team member dedicated to that task, that’s a great thing! However, for most small businesses, that’s not a feasible option.
That leads us to option 4. In order to ensure that your taxes are done correctly without putting yourself through a lot of unnecessary stress, partner with an experienced tax professional.
According to a recent study done by the U.S. government’s General Accounting Office, 77% of over 71 million taxpayers report that they benefited from using a professional tax preparer.
CPA firms like ours handle hundreds of unique tax situations every year and have teams of experienced professionals who are familiar with ever-changing tax laws and filing requirements. In our case, we have over 40 years of tax prep experience to bring to the table.
Small Business Tax Preparation Services
Here’s what you can expect from our small business tax preparation services:
- Your tax return will be checked and rechecked by our computer software identifying potential problems the IRS may look at more closely and reviewing the math to limit IRS contacts.
- Your tax return can be filed electronically so you will get a refund back quicker.
- Our staff will show you how to adjust your payroll withholding to get more money back each week. Why give the IRS an interest-free loan for up to 16 months?
- We will show you potential deductions to limit your tax liability for next year. In addition, we will give you a sheet of commonly overlooked deductions to limit the following year’s tax liability.
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Professional Tax Preparers Pros and Cons
In the world of tax services, you can run into a wide range of preparers. It’s important to do your own due diligence before you entrust such an important financial decision to someone else. Here are a few pros and cons to keep in mind when thinking about working with a professional tax preparer.
Con – Anyone can claim to do tax prep.
Be careful about falling victim to someone who is, at best, not qualified enough to do your taxes well, or worse, a complete scam artist. Before you hire someone to do your taxes, check their credentials. Ask them for their “preparer tax identification number” (or PTIN). This unique number is issued by the IRS and is required for anyone who prepares or assists with the preparation of tax returns for compensation.
Along those same lines, be careful about outsourcing your tax preparation overseas. Many foreign accountants advertise heavily in the US this time of year. And some large firms you hire in the US will actually send your file to accountants in other countries where they can take advantage of lower labor costs. The savings per hour aren’t worth the risk of costly inaccuracies or potentially compromised personal data.
You’re much better off doing business locally whenever possible with a trusted US-based firm that you know will protect the accuracy and integrity of your information in-house with qualified professionals.
Con – Tax Professionals Can Seem Expensive.
Aren’t you going to pay a lot to have your taxes done professionally? The short answer is that it depends, but you’ll find it worth it.
As we’ll cover more in the next section, the cost of having a professional file your taxes can vary depending on the complexity of your situation. However…
Pro – Tax Professionals Will End Up Saving You Money (And Time!)
Tax regulations are constantly changing, and there is a lot of room for error on even the most basic tax returns. The time it takes and the consequences for making mistakes can be more expensive than anything you’d pay a CPA.
If you do your taxes yourself (even if you use software to help), imagine how much time you’ll spend just reading through forms and instructions. Then calculate how much your own time is worth per hour.
And if you do your own taxes, can you really be certain that you’ve filed them accurately and properly? A qualified CPA who does taxes for a living can save you from so much wasted time and unnecessary penalties.
Beyond that, they can make sure that you take advantage of all of the tax credits and deductions that you are entitled to. When you factor those things in, you’ll save way more than whatever you pay to have them do it!
Pro – Tax Prep Fees Are Deductible Too
If you itemize your deductions on your tax return, you can actually deduct any fees, mileage, and other expenses associated with the filing. Just be sure your accountant lists those fees and costs as “miscellaneous” deductions on your 1040.
How Much Does Small Business Tax Preparation Cost?
As Ramsey Solutions suggests in their article “How Much Does It Cost To Get Your Taxes Done?”, the cost of small business tax preparation depends largely on:
- Your preparer’s qualifications.
- Your level of preparation.
- Your area of the country.
- Your level of complication.
We Know Small Business Tax Prep!
Taxes have been a core part of our business for over 40 years now, and we have helped small business clients with every imaginable type of return along the way. Our team is made up of some of the best and most experienced tax experts anywhere,
We understand small businesses and we care enough to deliver the kind of results you deserve.
Also: Take a look at a handy guide we put together on “9 Simple Accounting Mistakes That Are Costing Your Business Money.” Your bottom line will thank you! Then schedule a call to get started on your tax return and find out what it means to “expect more from your CPA.”