Dec 28, 2015
As a small business, is it better to save money and do my taxes myself or hire a professional?
This is my first year owning my own business. I've always done my own personal taxes but I have no experience filing taxes as an owner to a new business. We have hired several employees that I have to submit W-2 forms for. Am I better off doing this myself to save money or should I skip the hassle and make sure it's done right by hiring a professional?
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Dec 28, 2015
It's easy for small businesses to think they can save money by doing everything themselves, including taxes. However, how much money will you have "saved" when you make an error on those taxes and incur penalties? Not saying you will, but business tax code is a lot more complex than personal taxes (not to mention that owning a business will totally change your personal taxes as well) and it's not your area of expertise.
Dec 28, 2015
Cory:
Congratulations on making it through the first year. Like the company name too.
Here are my thoughts:
Time, money and risk are the elements under consideration.
The costs, penalties and negative impact associated with an error made on your taxes will surpass any fees that you would pay a professional to handle these issues on your behalf.
Mistakes made in this area can threaten the existence of your business. IMHO, it is not worth the risk.
Do yourself, the family, employees and the community your business serves a favor - hire a professional (EA or CPA) to do your taxes. Check with your peers, the SBA/SBDC/SCORE or local Chamber of Commerce to obtain suitable referrals.
Tip: There are three (3) professionals you want on your team - an accountant, an attorney and a business advisor.
We are paid to learn, know about and counsel you on the legal/technical issues that impact your business. There is also demonstrable expertise acquired in repetition - we do regularly what you need to address occasionally. We also have the added vantage point of serving many organizations that deal with similar situations. You get the benefit of that exposure/experience.
Another added (yet sometimes unrealized) benefit in building such a team is that often we are connected to a vast network of people and professionals - leading to the ages-old statement, “oh, them?…they are a client of ours…” which may result in other referrals for your business. Most professionals are happy to refer/connect clients to other businesses that they (wait for it), know, like and trust. It comes with the territory.
Dec 28, 2015
Because I am not in your area, although I am an accountant (CPA), I can answer this without sounding self-serving ;-) You should absolutely use an accountant. There are often multiple issues that are different or that may allow for some tax planning opportunities that a good accountant can advise you on that may go far beyond the simple tax preparation issue & that will far outweigh any costs. Even without those, you will have the peace of mind of knowing its done, properly & completely without any stress on your part. When I setup my business, I could have spent time designing logo & website - but felt that my time was better served concentrating on what I am good at and what makes me money - and hire out the rest. Best decision I ever made!
Good luck in your new business!
Dec 28, 2015
I'm going to go against the general grain here...
I opted to do my own taxes with the help of the online Accounting Application Free Agent.
I'm not going to give you a sales spiel about the App as you can check it out yourself but for a small business it covers most needs including; Tax Submissions, Invoicing, Estimates, Account Tracking, Expenses etc. I'm not using payroll within the App but I also think its included.
Using the service its easy to input the data as you go along then Free Agemt submits your tax return for you.
Best of all it's free to try for 30 days and then between £20-30 depending whether you are a Sole Trader or Limited Company.
I've been using the service for around 6 months and its been a life saver.
*I'm in now way linked to Free Agent just a small business who uses the service.
Heres a cheeky 10% OFF discount code as well:
Code: 44ya71ea
http://fre.ag/44ya71ea
Dec 28, 2015
Actually there is an alternative and that is to buy a decent accounting package that does most of the thinking for you. I would agree with many who have written that as an owner you have better things to do than study tax law but I would also argue that you do need to understand the principles to make well informed decisions. I use a cloud based accounting package that sucks all my transactions in from my bank account, does my payroll, calculates sales taxes and files returns and produces P&L and other reports st a fraction of the cost of hiring a book keeper IR accountant. That said it is worth taking advice but at least if your software does the heavy lifting you only pay for real value adding advice. Take a look at Freshbooks or Xero.
Dec 29, 2015
The answer to that question strongly depends on how well you understand the various intricacies of the tax legislation, how much your turnover is, and how much profit you actually make. The problem in that question is that knowing your profit strongly depends on your understanding of things like deductibles, charitable contributions, and other requirements under the law that you may well be able to write off.
If you do have a good understanding of tax law you might well be able to save yourself the fee you'd pay for an accountant, but consider this before you go ahead an do your own taxes.
A good accountant isn't just someone who files the necessary paperwork for you. They can also help with financial planning, both for yourself, and and for the future financial growth of your business.
There are also legal obligations as a business owner which you are personally responsible, and therefore liable for, particularly if employ staff. A good qualified accountant can help you with untangle the must do from the should do, and the will offer in the future categories. For instance in the UK it is now law for all employers to off er staff, however big or small a business they are, a work place pension. Putting that in place is not an inconsiderable undertaking, and you have to evaluate how much your time is worth! Are you better at doing taxes, or planning your next line of products.
Time as they say, is money and in business that means every moment you spend, even answering a question on a social network, has a cost benefit that needs to be evaluated. Also when you hire an accountant you are taking a lot of pressure off yourself, and offloading a needed task to someone potentially better qualified to do it.
In short doing your taxes shouldn't necessarily be seen as another chore that you have to do to stay legal, it's an opportunity to take a closer look at the way you operate as a business, and fine-tune procedures you employ on a day-to-day basis. As the person who does that planning, even with an acute understanding of the legislation, you may well dismiss things that a new set of eyes would point out to you as an area in need of attention, and posible change...
In short as the owner of a business your focus needs to be on the things you do well and that have made your business successful. If that is doing your taxes then fair enough, but based on past experience I seriously doubt that it is. Your business is probably where it is due to your creative input, and one of the most important skill that you need to learn as a small business owner is to delegate where posible tasks that can be handed off to other people who are more skilled at doing them...
Good luck, and may the coming new year bring you prosperity and security :-)
Barry Robinson
New Street Photography
New Street Creative's
Dec 28, 2015
Question; Even though you can do it, do you really want the stress and risk associated with doing your business's tax return?
Answer; I use an inexpensive accountant who is liable and is kind enough to field any of my tax questions during the year. I rest easy knowing a competent and friendly professional is handling my LLC's taxes. After all, he is also running his own small LLC and has a vested interest in my success.
Best wishes for a prosperous 2016!
Dec 28, 2015
The biggest mistake I see in small businesses is thinking that they are saving money by doing their own various tax filings. Usually.....I mean about 90% of the time, they make serious mistakes and get penalties on the payroll level and the income reporting level. So, hire a professional. They will save you tons of money and grief. Your time is better spent selling whatever your business sells.
Dec 28, 2015
It's really a cost-benefit analysis - what could you be doing instead of spending time both learning the info that you need to do your taxes and actually doing them? If you're not a tax/accounting expert, generally the answer is hire a professional.
Dec 28, 2015
Hi Corey
My advice is to hire an accountant. Your time and energy should be spent on growing your business, not concerning yourself with all the tax laws and forms.