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?
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.
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.
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!
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.
If you have some time, you always can study it by yourself by following a specific tax course. But bear in mind that taxes are changing each year. Maybe you can received some help, for free, offered by the community when it is time to fill in the taxes. Or indeed you can let it do by a professional but ask then in advance how much it will cost and how much time it will take as they will count by hour.
Good luck to you and your business. Raf Meysmans
Do you do your own dental work? How about medical diagnosis ?
I always recommend using a professional when it comes to accounting, taxes, legal, marketing, etc.
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!
I have always done my own, but I have a strong financial background and a solo consulting practice is quite easy to account for. You do not mention the kind of business you are running, but once you hire employees it can get rather complicated. Unless you have a strong tax or financial background, I would strongly suggest that you hire a professional CPA to handle this. There are many who specialize in the needs of small business, with affordable rates.
Corey, Hire a professional. Not sure which country you are in but in Australia accounting fees are tax deductible as a business expense. A good accountant will save you money, help you structure your tax position effectively, (i.e. minimise it legally) and you won't lose any sleep. Plus, if you need to borrow money, personally or for the business, having your accounts undertaken by a professional helps a lot. Also, there might be tax incentives for new businesses they you are entitled to, or at least you might have the ability to carry forward losses etc.....
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.