Starting out, many business owners do everything or next to everything in their businesses. When it comes to taxes, however, you might be wondering if you should attempt to do it yourself or outsource the task. There are advantages and disadvantages to each.
With accounting software and online tax help, it can seem like a great idea to do your own business taxes . . . but are you sure it’s the best way? When it comes down to DIY or outsourcing your business taxes, it can be difficult to decide which is the best option for your company. There are pros and cons to each choice, so inform yourself before deciding.
Do It Yourself Business Taxes
Doing your own taxes is something you may have done for years with your personal taxes, but moving up to a business can be challenging. There are different rules and you’ll need to be familiar with them all in order to file correctly. It may be difficult to make the switch. That being said, there are plenty of good reasons to go this route.
- Save money
- Instant access to information
- Complete control over all your financial data
- Mistakes are hard to find and fix
- Time spent maintaining files
- Requires learning all the laws for business taxes
Should you decide to go the DIY route, you will need to keep track of all your business expenditures throughout the year and save receipts, like you would with an accountant. It’s very helpful to invest in software that can help you manage your accounting, as well. This makes it much easier when it comes time to file your taxes. QuickBooks and FreshBooks offer affordable online accounting software designed for small businesses.
Start early to ensure that you have enough time to get everything done. Filling in tax forms inevitably takes longer than we expect, so make sure you give yourself at least 3-5 days more than you expect to need. Since most business owners are running their business at the same time as filing taxes, it can take a bit longer, as well. Factor in time to find missing paperwork, interruptions and for looking up the rules when necessary. If you miss this or know you won’t make it in time, you can file for a tax extension.
Many business owners find that it is easiest to file on a quarterly basis so they don’t have to worry about dealing with a full 12 months of data. This may be helpful, particularly early on when you are still relatively new to the entire process.
Outsource Your Business Taxes
Outsourcing means you pass your receipts and information to an experienced tax accountant and let them figure everything out. You may need to answer some questions for them, and if you aren’t organized, this could mean digging up some old receipts or payroll information.
- An expert will handle everything
- Fewer mistakes
- An accountant is familiar with the process and new tax laws
- Costs may be somewhat high
- Requests to see data may be delayed
- You have to trust the accountant with your sensitive info
If you decide to outsource, you should start by looking for either an experienced business tax accountant or a larger company like H&R Block, which specializes in this type of accounting. Before you arrive, be sure to organize all your receipts into categories so the accountant can see at a glance which expenses were for which category.
Hiring someone else to do a task like this could be the best move for your business. When you find a good accountant, make sure you use them year after year, since they will be familiar with your specific needs and won’t need to ask the same questions every time. It’s also a good idea to find out from your accountant if there is anything else they need from you. Getting tips for staying organized throughout the year can make next year’s taxes even easier and your accountant will be happier, too.
Which Works for You?
In the end, whether or not you outsource your taxes is your decision. You will need to examine both your own skills and just how profitable it is for you to do your own accounting. Anyone who is hopeless in math, of course, will find that outsourcing is a far more economical way to go since errors in taxes can end up costing you thousands of dollars.
Something else to consider is how much time it will take you to learn the accounting software and fill out the forms. If you already have experience in tax accounting, then this may be negligible, but in many cases, it will take quite a bit of time. This is time that you could be spending on money earning activities. Calculate the real cost of not doing those activities while you’re working on the taxes and you will have a better idea as to which choice will work best for you. It may be cheaper in the long run to pay an accountant to handle everything for you.
Of course, what works this year may not next year. It might be feasible for you to handle your own taxes when you are just starting out, but as you get bigger and need to focus more on the work side of things, you may choose to outsource. There’s no reason to stick to the same thing every year . . . so make the best decision for now and reevaluate in a few months.