DIY Taxes or Hire a Professional? Why It Matters.

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DIY Taxes or Hire a Professional? Why It Matters.

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When it comes to filing your small business taxes, it all boils down to two options: following the DIY method and filing your own taxes, or working with a professional such as a CPA, qualified tax preparer, or tax lawyer.

How do you decide? You'll want to consider a few things first, such as how comfortable and confident you are with taking on the responsibility of filing your own business taxes. How complicated will your tax situation be, and how knowledgeable are you about the filing process? You'll need to be aware of any tax changes or updated tax laws, as well as capable of working with the complex forms and filing involved. Anything less could prove to be costly, especially if a business owner does not maximize their deductions.

So is following the DIY self-tax preparation method worth it? Or would the cost of having an accountant or tax preparer help pay for itself, especially considering the service, experience, and access to advice that comes with it? (Let’s also not forget that tax planning and preparing takes time, which can be as valuable to a business owner as money.) Taking all this into consideration, let’s break it down and see which of the two options would be best for you.

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Is It Better to Do Your Taxes Yourself or Use a Professional?

When it comes to this question, small business owners need to consider a number of factors. Do they have the time to work on their taxes? (This includes keeping track of records, organizing documents, and completing all the required tax forms.) Business owners need to be honest and ask themselves if they know enough when it comes to tax codes. If your business is a sole proprietorship or single-member LLC, odds are that your taxes will not be as complicated as a business juggling multiple employees, payroll, retirement accounts, and insurance.

Although filing taxes on your own can help save a few hundred dollars, you also risk leaving money on the table by overlooking credits and deductions. Small business owners need to always think of the financial health of their business, and unnecessarily shelling out money to the IRS takes capital away from a business. Another factor to consider is ensuring that your filing is error-free. Any mistake in your tax forms can cause problems, and the last thing you want is for the IRS to notify you of an error or omission in your filing. Some errors, as unintended as they might be, can raise a red flag and put your business at greater risk for an audit.

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Tax Software vs. Tax Professional

If your taxes are simple and you earn less than $72,000, you can file online directly on the IRS website for free. An estimated 100 million Americans are eligible for this tax preparation option.

Beyond using the IRS free filing option, there are a number of tax preparation software options available for small businesses, but they do come at a cost, and you are still taking time away from your business to prepare and file your taxes. Three popular tax software options for small businesses include:

  1. Intuit TurboTax: Starting costs at $170 for federal and $50 per state
  2. H&R Block: Starting costs at $109.99 for federal and $44.99 per state
  3. Liberty Tax: Starting at $89.95 for federal and $34.95 per state

Although many tax software programs are easy to navigate, the reality is that each business differs when it comes to its tax situation, and there is no one-size-fits-all solution. Many tax software programs do not come with a consultant on the other end to help answer questions and guide you through the process. For many businesses, the added support of a  professional tax preparer is crucial.

Choosing a Tax Professional

We’ve established that choosing the DIY option can save you money, but it also opens you up to the risk of errors and omissions. These can result in lost credits and deductions — or worse, an unwanted call from the IRS. When it comes to error-free filling, a good professional tax preparer will help ensure the accuracy of your filling, and they'll even deal with IRS communications if any questions do happen to come up.

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A tax professional preparer can:

  • Ensure you maximize your deductions and credits
  • Ensure the accuracy of your filing
  • Potentially represent you in case of IRS contact, even if the error is on the part of the IRS
  • Review all your business expenses, including property, rent, leasing, investment, insurance, supplies, and professional fees, such as tax preparation services
  • Provide a close review of all your potential (cost-saving) deductions
  • Free up your time so you can focus on your business

Hiring a CPA can also help you with tax planning, such as expansion plans, buying new equipment or machinery, or even selling off assets. In the end, you’ll need to conduct a cost-benefit analysis that would best serve your needs and the needs of your business.

Getting the Right Support with Incfile

Take the first step and go to Incfile for a free tax consultation. Incfile offers the support of bookkeepers and accountants to help prepare, review, and file sole proprietor, LLC, S Corporation, and C Corporation business tax returns, ensuring that you meet the government’s filing requirements without any errors or headaches.

Bookkeeping & Accounting | Incfile

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