The deadline is quickly approaching! Are your small business taxes ready to go?
If not, now is the time to organize your paperwork and devise a strategy to file on or before April 15th. One big question you need to answer is how are you going to prepare and file – will you go solo or will you work with a professional? Here are some things to consider.
Complexity
The U.S. Tax Code is complex. If you don’t pay the correct taxes, you could get hit with penalties and fines. Accountants let you know all filing details early on so that you can comply and avoid trouble.
Speaking of complexity, some small businesses books are intricate. Anne Ross is the owner of a small rental business in Los Angeles, CA. Because of the multifaceted nature of renting and returns, she was more comfortable doing taxes herself. “Nobody understand the business like I do. Doing my own taxes wasn’t fun but it was much less daunting that I thought.” Ross says doing taxes had another benefit she didn’t expect. “I felt empowered and I learned more about my business – where we could expand and where we should cut – than I would have if I turned everything over to an accountant.”
Advice
There’s another important reason to hire a professional - advice. Karen Smith owns Fireworx Promotions in Richmond, Virginia. She says she wouldn’t even consider taking on taxes herself. “I use a professional to help me find savings and deductions. He also advises on the advantages of incorporating versus sole proprietorship. The money I save in deductions is well worth the cost of the accountant, plus it gives me peace of mind.”
Time and Costs
You might think you’re saving a ton of money by self-filing. But you need to count in the price of your time and labor. According to the legal website NOLO, the average business tax filing requires 24 hours for small businesses. Those hours can spike as your business grows. If you’re not a one man show, you might need to get other employees involved to gather documents or crunch numbers. This also counts as labor costs and pulls your employees away from the day-to-day tasks needed to run your business.
TurboTax and other online tax websites are an item to put in the “expenses” column when deciding if you should take on the task yourself. For example, TurboTax charges $80 for a federal small business tax filing with state filings costing extra.
Small business owner Smith has advice if you’re searching for an accountant. “It may sound obvious, but be sure you use someone experienced in small businesses. Don’t just go with an accountant a friend used for their taxes. Also, don’t be afraid to ask for references. Go with someone who has a good reputation.”
If you are going the DIY route, make sure you take all of the deductions you’re entitled to as a small business owner. Check out our blog post here for more deduction information: Tax Deductions for Your Small Business
Additionally, H&R Block website has a summary of what you'll need to prepare your small business taxes.
