Have you ever asked the question “should I hire a tax pro”? In many cases, if you are asking this question, the answer is that you might need to at least consider consulting with a professional. The reality is that many returns are simple enough you might be able to handle it DIY. But there are also returns that are more complex. As a business owner, it’s important to get it right and ensure you maximize your deductions for the most benefit.
Choosing between DIY and professional tax services comes down to your unique needs, skills, and preferences. There are certainly pros and cons to each side. If you’re struggling to determine which way you should go, check out this guide to learn more about the advantages and disadvantages of each option.
DIY Tax Filing: Pros and Cons
Let’s start with DIY. Ask yourself first how comfortable you are with tax laws, tax software, and your own recordkeeping. How complex is your business? Do you have all the documentation you need, and are you comfortable with filing on your own? These will be very important questions for your final decision.
The good news is that there are a lot of online resources and tax software options that can be helpful to business owners. When you choose to file your own taxes, these are going to be very important for you.
Let’s look at the pros and cons of DIY.
DIY Filing Pros:
- Cost Savings: hiring a professional can be costly, depending on the structure of your business and your overall tax situation. For some businesses, it could cost hundreds or thousands of dollars, while using manual tax filing software is likely going to be closer to $100-$200 for a business.
- Control: when you file your business taxes, you get to be in control of entries as well as your overall business finances. It might help give you a deeper understanding of expenses, income, and deductions so you can make informed business decisions.
- Convenience: most tax software is going to walk you through the process step by step and give you the option to save and come back to your progress. It’s highly accessible and convenient for you to do at your own pace, in accordance with your filing deadlines.
- Learning: you can learn a lot from doing your own taxes, giving you more knowledge about tax laws and even regulations or standards that will impact your business.
These pros are just part of the picture, though. Let’s look at the cons as well.
DIY Filing Cons:
- Time-Consuming: if you aren’t familiar with or don’t have the expertise, this is going to take a lot of time. It’s often the time put into filing that leads to the costs of hiring a CPA. Familiarity with tax codes and the preparation process will require significant time that takes you away from business or family or both.
- Risk of Errors: if you file DIY, you are held responsible for any errors that may occur from your filing. Even what seems like a minor error can sometimes lead to high penalties or trigger an IRS audit. You also could miss valuable deductions that save your business money.
- Limited Expertise: unless you are a tax guru doing your own return, you simply don’t have the training or expertise to catch all the nuances for your tax situation. Tax professionals have the expertise to help maximize deductions while ensuring compliance for you.
- Lack of Advice: there will be points when you may not know which way to go or what to do. Sadly, with software, you rarely get personalized advice that answers specific questions or scenarios.
Hiring a Professional: Pros and Cons
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If your business isn’t simple, hiring a professional is often well worth the investment. Business owners can benefit from expert guidance, professional filing services, and knowing they have someone else looking at the numbers to ensure it is done correctly. It’s an investment for your business and one that can often be claimed as a deductible expense.
Let’s look at the pros and cons of hiring a professional so you can compare.
Professional Preparation Pros:
- Expertise and Accuracy: a professional is trained and knowledgeable about tax law and filing practices, and they will bring that expertise to your return process, which leads to better accuracy and compliance.
- Save Time: if you don’t have to file your own taxes and you let the professionals handle it, you save tons of time. The only time required is for gathering the documents, reports, and paperwork to provide for the CPA and then stopping by to provide any signatures and pick up your complete return.
- Maximize Deductions and Credits: businesses have a lot of deduction and credit opportunities, and working with a professional better equips them to identify these and provide tax-saving strategies that you could easily overlook.
- Audit Support: if you hire a professional, they typically take responsibility for any errors that could occur. In addition, if you do get audited, they will provide audit support for you.
- Ongoing Advice and Support: a professional isn’t going to just file your taxes and cut you loose. They often make themselves available to you so you can gain access to ongoing support and advice for your business practices.
Professional Preparation Cons:
- Higher Costs: yes, hiring a professional will likely cost you more, especially for complex business structures. Keep in mind these costs cover their professional hours and expertise.
- Third-Party Dependency: you’re relying on a third party, which may not always be convenient for you, and it’s sometimes hard to let go and trust that they truly know your business and will do what’s best for you.
- Seeking a Professional: finding a professional who is the right fit for your needs can be a challenging process, but when you do find one, it’s well worth your efforts and the results.
Should I Hire a Tax Pro? Business Tax Preparation with Katherine M. Johnson, CPA
In answer to your question of “should I hire a tax pro,” the answer is that it depends. There are certainly substantial benefits to working with a professional, but the choice is yours to make.
If you’re considering working with a professional tax adviser for your business taxes, we would love to help. Contact us today, and let’s chat!
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