If you are a small business owner, chances are that you are doing your own taxes and struggling to keep up with the labyrinth of rules and regulations. This is an area where hiring outside help can save a huge amount of time for those who want to manage their financial affairs appropriately. What do you do when the notice comes from the IRS and it wants proof? When should you say “yes” or “no” to an offer from your accountant?
You might have a question like this one in mind, but instead of asking on social media (where businesses can get scammed), take some time to figure out when it is time for an accountant and which kind will work best for your small business.
By reading and following the advice below, you can make the right choice that fits your needs.
Why Should You Hire an Accountant?
This is a question that Mike Savage New Canaan asked when he was considering starting the accountancy firm 1-800 Accountant. Mike Savage from New Canaan, Connecticut has experienced success by focusing on offering small businesses the level of service that historically has only been available to corporates that can afford to employ the services of the big four.
Here are three reasons why you should consider hiring a professional in business tax matters:
1. Get clear and concise instructions for producing documents requested by the IRS
Setting out all of your assets and liabilities correctly is the beginning of a successful business tax return. You mustn’t take longer than four weeks to complete your return once you’ve received it. Your accountant will help with instructions that will assist you in completing this process quickly by giving you instructions as well as helpful tips for completing it correctly.
2. They will help you file the correct returns:
In addition to providing instructions, your accountant can also help you file the correct tax return. Typically, he or she will be able to recommend which filing status is best for your business and which forms would be used to complete it. Don’t make the mistake of just filing one form with the IRS; you might need to fill out multiple forms, depending on whether a certain asset is being sold or not, or how much income you make in a certain year.
3. They can provide tax advice
You may want to ask your accountants for some information about tax laws and regulations that pertain specifically to your business. For example, many small businesses that operate for a short amount of time may have to file a Schedule C for their tax return. If you fall into this category, you should consult with an accountant about whether or not you have to pay taxes on your small business income.
Do You Need An Accountant?
Before hiring an accountant to help with your tax returns, make sure that you need one! There are some instances where the IRS will send the business owner the 1040EZ form. This is a very basic form that doesn’t require much more than adding up the numbers and writing in figures.
Bookkeeper Vs. Accountant
Bookkeepers are undoubtedly the most undervalued help that a small business owner can employ. They are generally very good with numbers and they can sort out a lot of issues that arise as a result of having to keep track of all kinds of transactions.
On the other hand, bookkeepers and accountants have very different roles to play in a business. Bookkeepers must use their skills to keep track of their clients’ bills and cash flow, while accountants deal with the minutiae of accounting, such as double-checking work orders, getting information about suppliers and taxes, etc.
An accountant needs both bookkeeping experience and accounting knowledge to be truly effective. Given that an accountant is your partner in handling tax issues, business deals, and other financial matters, it is important to have a clear understanding of what the bookkeeper can do and what the accountant can do. If you need further assistance with choosing an accountant, you can find out more here.
How to Choose An Accountant?
Many people recommend checking out the American Institute of Certified Public Accountants website for a list of CPAs in your area. The site has a search feature that will show nearby accountants that meet specific criteria.
Here are some questions you can as a potential accountant/accountancy firm:
- Speak with local accountants who have worked with your area of business for a while. It is a good idea to ask them how busy they are.
- Speak with your friends who are business owners and talk about the accountant’s performance. Do they think that the accountant was on time and flexible or did they have any complaints?
- Go online and find a few reviews of accountants in your area. You may also want to look at testimonials from clients of the accountant. These will help you gauge whether the person can handle taxes well or not.
- Ask the accountant about their experience with small business owners. The accountant should have some experience with this and be able to answer questions about how to deal with taxes.
- If there is no trust between you and the accountant, you may need to look for an accountancy firm that has a good reputation in your region.
- In addition to meeting these requirements, make sure that you can find someone who can do your taxes well. You should ask the accountant if he or she will follow what you tell him or her or not. Also, make sure that they will explain things clearly and help you understand any issues that arise in tax matters.
How Much Does It Cost To Hire An Accountant?
The cost of hiring an accountant or accountancy firm is largely dependent on the work that you need to be done and the services provided. For example, you will have to hire a different accountant for basic tax preparation than you would if you needed general accounting and business services.
Before finalizing a potential account, speak with several accountants to compare their rates and services. You may also want to ask other business owners who they recommend in your area that they have worked with before. You can even look up information on professionals in your area by visiting a local chamber of commerce’s website or perusing the internet for comments by customers.
Sole Proprietorship Vs. Partnership Vs. Limited Liability Corporation (LLC)
In general, you will have to make a choice between a sole proprietorship, partnership, or LLC when starting your business. Each structure has its own pros and cons. For example, you will have to pay higher taxes if you are operating under an LLC but it also protects your business from getting sued or paying out unnecessary compensation.
1. Sole Proprietorship:
Sole proprietorships are very simple to set up with the state and local government and they cost nothing to start up. This is because the owner of the company is considered its own entity. They will have to file business taxes and tax returns through the business’s name. The sole proprietor will also be responsible for any debts and other financial liabilities that are incurred by the company.
You should note that in a sole proprietorship, all profits are considered to be part of your income and they will appear on your 1040 form as “pass-through income.” However, this is only true if you don’t set up any sort of retirement plan for your company.
When you have multiple partners in your business, it is a partnership. You will have to file an entity statement with the state or local government and register with the IRS as well. The good news is that there are no annual fees or state taxes associated with starting a partnership. However, you will have to deal with partnership taxes and filing.
In addition to this, the partners are responsible for any debts or other financial liabilities that the business incurs. The partners will also have to file separate tax returns and your profits are taxed individually. You can take steps to reduce your tax burden by setting up a retirement plan to defer income taxes on your profits.
3. Limited Liability Corporation (LLC)
If you form an LLC, you will have to create Articles of Organization and submit them to the state or local government for approval. This process will cost around $100 to $200 and usually takes about a month to get approval for your LLC depending on your state’s requirements. You will also have to register with the IRS as an LLC and pay the annual fee. The LLC is great because it is a cheap way to protect your personal assets in the event of an issue between you and your partners.
In addition to this, business profits are taxed as “pass-through income” if you don’t have any type of retirement plan in place for your LLC. You can also claim all your expenses on your personal tax filings. However, LLCs are complicated because they are taxed on the partnership level, which can be confusing for many business owners.
Regardless of which structure you decide to use in your business, setting up your company and filing taxes comes with its own set of requirements. Therefore, you will have to do the research and determine what is best for your business. You should also make sure that you partner correctly with any accountant or accounting firm that you hire to ensure the best results
Most of the time, a small business owner will have to pay multiple taxes due on their income. The penalties associated with failure to file are also higher if not filed on time, so it’s important that you keep a schedule of when deadlines need to be met and make sure they’re met every year. Other things such as self-employment taxes and payroll taxes can be quite costly.
Taxes can sometimes be a confusing and grueling process. Thankfully, there are tax preparers that specialize in helping small business owners stay on top of their taxes so they can maximize their profits and minimize the amount of work involved. These tax services will make things simpler for you by dealing with filing the proper paperwork and keeping everything straight.
Remote accounting is an easy, fast, and secure way to do your taxes online. An accountant or bookkeeper sets up a teleconference with a representative from each of your offices including headquarters, branch locations or even remote employees, scans all necessary documents, such as W-2 forms, and logs them into simple step-by-step questionnaires via secure internet connectivity.