When you were working a full-time job, you had no kids and no other dependents, and you got a W-2 back every year, doing your taxes was easy. You just got a 1040-EZ form or went online and used one of the free tax services, and you were done within a few minutes. Then you just had to file, and you could expect to see a return whenever the IRS got around to it. Now that you’re launching or running your own business, though, things are a little more complicated, and you might be thinking about getting an accountant. Before you decide whether to do your own taxes or to pay someone else to do them, take a few things into consideration.
YOU HAVE A BACKGROUND IN ACCOUNTING AND TAX LAW
If you have education and training in accounting and tax law, there’s really no reason to pay someone else to do your taxes for you…unless your time is too valuable to waste on figuring out your return. Basically, consider how much money you’re saving and how much your “making” (getting back) in the time it takes you to do your taxes. Then compare that to how much you could be making by letting someone else do them and freeing up your time to work on your business. Looking at which number is bigger will help you decide whether or not you should be doing your own taxes.
YOUR MARITAL STATUS HAS CHANGED AND/OR YOU’VE HAD A BABY
Getting married, getting divorced, and having babies (adding dependents) will change your status with the IRS and the tax laws that apply to you. If any of these things has happened in your life within the past year, you could very easily miss some deductions and tax benefits or you might accidentally get the IRS’ attention and bring an audit down on your shoulders.
YOUR BUSINESS CHANGES EVERYTHING FOR YOUR TAXES
Just like getting married or having a baby, starting a business changes a lot for your taxes. Whether you’re a contractor or consultant or you’re a CEO, you’ll owe the government the taxes that would’ve been taken out of your pay if you worked for someone else. It may be best to pay some estimated taxes each quarter, or it may be better to add up all of your deductibles from the previous year and file everything at once. Your accountant will know the best strategy, and you’ll save a lot of money by paying them to figure it out for you.
YOU’VE CREATED AN LLC FOR YOUR BUSINESS
Forming an LLC for your business protects you and your personal assets if your business goes into debt. While this “pass-through” form of incorporation doesn’t make your business a separate entity, it does complicate your taxes a bit. If you don’t have any experience with corporate taxes or owning a business, you should probably leave this up to the professionals.
YOU CAN WRITE YOUR ACCOUNTANT’S FEE OFF NEXT YEAR
Overall, if you can afford to pay an accountant $200-500 to do your taxes for you, you absolutely should. Not only will they help you get a better refund back without looking suspicious and causing the IRS to audit you, but you can also write off your accountant’s fee as a business expense for your taxes next year.
Unless you’re an accountant yourself and you have a lot of experience calculating and filing these kinds of taxes, I really don’t recommend trying to do it yourself. For a lot of new entrepreneurs, hiring an accountant is their first real act of delegation. You’ll be delegating a lot of work over the next few months and years as you build your brand, so why not start now with your taxes?