Small business owners wear many hats. You may not have a full- or part-time accountant or bookkeeper to help with keeping records and paying local, state, and federal taxes. Your own level of experience and awareness of tax law requirements can range from nonexistent to extensive.
You may not think it's hard to prepare and file your tax returns yourself, either manually or using tax filing software. But tax compliance isn't a matter to be taken lightly, and you may want to consider getting help from a tax professional.
There are a number of situations where it makes sense to hire a pro.
You're not familiar with tax rules
If you don't have any prior experience with business taxes or knowledge of tax law, working with a tax professional can protect your business and help you avoid getting on the wrong side of the IRS and other tax authorities.
Even if you have knowledge and experience in dealing with tax matters, you may decide that your time could be better spent dealing with other business matters. Every quarter, and especially at year-end, tax filings require a significant amount of time under tight deadlines. Tax regulations change every year, so keeping up with them on an ongoing basis may require a lot of your time and attention.
Using online tax preparation software is certainly faster than preparing tax returns manually, and most reputable tax software asks simple questions to help you capture your taxable income and claim the right tax deductions and credits.
If you do decide to hire a professional, the type of professional you engage depends on the size and complexity of your business and your budget. Basic tax preparation services may not be that expensive, but some tax professionals also offer value-added services to help you make better business decisions.
Your tax return is too complex
IRS and state tax guidelines and forms are not straightforward, even for a small business with limited operations. If your business is more complex, because you operate in multiple states, have several related business entities, or there are changes in the business ownership or operations during a period, the required tax return complexity will increase.
You may be missing valuable tax breaks
A tax professional can help you with tax planning and strategies to minimize your business taxes legitimately.
A professional can generate 'what if' scenarios for business changes you might be able to make that would also have positive tax results or make you aware of specific deductions available for your industry.
You might be leaving money on the table if you're not familiar with potential deductions and credits, that can save you money and help you hold on to more of your business income.
Many tax professionals prepare both business and personal tax returns, so they can take a holistic view of your tax situation and recommend valuable tax saving opportunities.
You have help if you make a mistake or are audited
Even small mistakes like transposed numbers or missing a decimal can result in errors in the amount of taxes you pay. Most of the time, the IRS will catch simple math errors and simply send you a notice letting you know you owe additional tax (or are due a bigger refund).
However, if the IRS has reason to believe the errors were not accidental, they can impose fines and even criminal charges. Having a qualified professional prepare your taxes, with your review, increase the likelihood that your returns are accurate.
If the IRS notifies you that you are being audited, this is an area where you definitely don't want to go it alone. An enrolled agent, CPA, or tax attorney can represent you during the audit. They're a lot more familiar with the tax laws and the audit process.
Preparing your business tax returns yourself can take a great amount of time, patience, and attention to detail. Almost every business transaction has a potential tax consequence, and unusual transactions can create red flags on tax returns if not handled correctly. Small business owners can save time, money, and potential legal issues by engaging a professional for their tax preparation needs.
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