Do you do your own taxes? Today’s post is for you tax DIYers.
Do you currently wear all the “hats” in your small business? This is fairly common for first time small business owners. As a means of saving a few dollars, they end up taking on all of the responsibilities of keeping their businesses afloat. While this may work in the beginning stages of your business, over time you will become stretched so thin that the quality of you work goes downhill.
One area in which you can’t afford to mess up is your finances. One missed tax deadline or a transposing of numbers could mean the difference between efficient tax filings and an audit.
Since tax season is officially here, let’s take a look at all of the things that you are going to have to manage with 100% accuracy if you don’t want the “Tax Man” to come knocking at your door:
This is the most basic thing you have to track for your company all year: the amount of money you made and the amount of money you spent. Unlike with individual and personal taxes, where you can round up or down to the nearest dollar, the IRS wants small businesses to report on every last penny. Will you get audited if you are four cents off? Probably not. But if you are four cents off in this most basic of areas, you can bet that that small mistake will compound into larger areas like…
Unless you are a sole proprietor who works completely alone, you like have at least a few employees who have been earning wages throughout the year. Again, what you pay your employees (and yourself! You should be paying yourself the same as you would an employee; you know that right?) must be managed down to the penny. This is because all sorts of things depend upon the accurate reporting of your employees’ wages. For example…
Employee Payroll Taxes
As an employer you are responsible for deducting things like social security, Medicare, income and state taxes from an employee’s paycheck. If you aren’t managing their wages to the penny, your calculations on these deductions will be off. That’s not just a headache, it is against the law!
It is also important that you are using the most up to date tables and tax rates for these deductions. Using old rates could land you in some very hot water.
These are not nearly as straightforward as the 1040 you are used to filling out for your personal tax return each year. For instance, you have to pay estimated tax payments throughout the year or the IRS will levee some really steep fines against you come tax time. For another, certain things must be listed in certain ways. Your utilities can be deducted, for example, but you don’t want to include them under the amount of money that you spent on advertising.
What a headache!
Aren’t There Tools to Help You?
Sure there are tools, apps, and other resources that can help you to complete your small business taxes and accounting on your own. However, as your business and revenue increase, managing your finances becomes a responsibility that in most cases you don’t have the time or knowledge to manage on your own, even using the tools and software you’ve downloaded.
What’s more important is that an accountant can also help to save you money by informing you of tax credits and deductions that you can make. According to ADP.com, there is literally billions of dollars worth of tax credits that your business could take advantage of each year. Since saving money is the main objective of small business owners, this benefit should be right up your alley.
All in all, financial services and professionals can make tax season a lot less stressful for you.
Benefits to Hiring an Accounting Professional
There are plenty of benefits that you could take advantage of, including:
- Industry experience – financial experts have the industry experience necessary to properly manage all of your corporate financial accounts.
- Up to date knowledge of tax law – As stated above, tax laws change all the time and failure to comply with those laws could result in the financial demise of your business. Financial experts such as accountants are trained to be aware of these changes and can inform you accordingly.
- Saves you money – When you’re not aware of all the various deductions and credits you can take advantage of, you literally throw money down the drain. A trained financial expert, on the other hand, can save you money by identifying those credits and deductions, and applying them to your taxes filings. They also save you money by identifying errors and keeping you up to date on deadlines which decrease your chances of audits, penalties, and fees.
- Frees up your time – All of the time you spend generating reports and filing business taxes can be used towards further developing your business. Whether you hire an accountant on a full time, part time, or contractual basis, their experience and efficiency in finances is sure to save you time in the end.
One business lesson all owners should take to heart is that of not stretching themselves too thin – especially not with something that requires a level of expertise, such as business finances. Whether you’re new to managing accounts, have been doing a decent job on your own, or just need to learn some of the basics, relying on the experience and skill of an accounting professional is advised. They have a plethora of knowledge and experience that can save you both money and time.
Michelle Peterman is a former communications associate who transitioned into building her own freelance business. She enjoys sharing the knowledge she accumulated from her journey with the business community.
Elena is founder of a technology PR agency that works with startups to billion-dollar companies. She is passionate about helping marketers and small business owners with practical publicity strategies, which she's also using for her own bling flip flop company.
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