Prepare My Own Small Business Taxes? What Could Go Wrong?
Entrepreneurs are, by nature, a very DIY community. Most started building their businesses with a workforce of one, so they’re used to wearing many hats: CEO, CIO, CTO … even CFO.
So naturally, now that we’re in tax season, many entrepreneurs might be asking themselves: “Should I prepare my own small business taxes?”
We won’t deny our own bias — as an accounting firm, we believe that people who aren’t trained on taxes should lean on support from the pros. But objectively speaking, there are numerous reasons why small business owners should suppress their do-it-all-myself approach — at least as far as crunching the numbers is concerned.
Why You Shouldn’t Do Small Business Taxes By Yourself
Time Is Money, And Taxes Take Time
One of the top reasons that small business owners consider preparing their own taxes is for the cost savings. Professional accounting help isn’t free, of course, and every dollar saved is a dollar that can be invested back into the company.
But they often forget about opportunity cost. Small business taxes are no small feat, especially when you’re unfamiliar with both the tax-filing process and the U.S. tax code. So, think about all the hours you’d end up spending preparing your own taxes, then ask yourself: “Is the time I’m losing not generating value for my business worth what I’m saving by not hiring a professional?” In many cases, you’ll discover that DIY puts you on the losing side of the deal.
You’re Not an Expert (At Taxes!)
If you’ve built your own small business, chances you’re an expert at something. Maybe that’s the industry or field your business is in, or at entrepreneurship as a whole. And chances are, if someone new to what you do asked you, “Is it easy to do what you do?”, you would tell them no — it takes education and/or hard work.
Same goes for taxes. No one wakes up a tax expert. And even once you’ve become a CPA or other tax professional, you need to continue learning. That’s because local, state and even federal tax rules change every year.
That’s where another part of the “I’ll save money by doing my taxes myself” myth breaks down. Professional tax preparers are much more likely to know the ins and outs of small business tax breaks, like deductible small business expenses. Thus, they’ll save you far more money than you reasonably could on your own.
You’ll Keep Cleaner Records
When you start to build a relationship with a tax professional, you become more attuned to what they (and thus, you) need to prepare your taxes year in and year out. That — as well as any other helpful advice your tax expert tosses your way — will make you better able to optimize your document organization throughout the year. And better record-keeping drastically reduces the chance of an audit.
If You Do Get Audited, Tax Experts Can Help
Some accountants and other tax professionals are capable of representing your small business should you be audited by the IRS. But we need to heavily emphasize “some” – this isn’t a service all tax pros offer across the board. So if you are worried about needing representation, make sure this is one of the questions you ask when you hire a tax pro.
You Risk Fewer Mistakes
Because small business taxes are so complex, there’s a lot that can go wrong. You could use the wrong form. Or you could underestimate your estimated taxes. You could overlook much-needed tax deductions and credits. Or you could forget supporting documentation. And there are so, so many more potential pitfalls.
At best, you could shortchange yourself and pay more in taxes than necessary. At worst, you’re looking at an egregious tax error that spurs an IRS audit, penalties, interest, even jail time.
Don’t DIY. Let Us Build You a Tax Plan.
Turn off the part of your brain that thinks DIY is the only way to grow. When it comes to your taxes, tax pros allow you to spend more time on what you do best. They can also maximize your tax savings and minimize your risk of being audited.
McManamon & Co. offers expert tax services to small and midsize businesses, from basic filings to payroll taxes to compliance services and more. And one way we can put your company in the driver’s seat is by building a tax strategy that you can follow year-round to maximize your savings.
Call McManamon at 440.892.8900 or contact us online today to see what we can do for you.
Tags: McManamon, McManamon & Co., small business, small business accounting, small business taxes, taxes | Posted in McManamon & Co., small business, small business taxes