Three reasons business owners should work with a tax professional even when just starting out

Many people have turned to do-it-yourself tax preparation over the last several years. Thanks to software available to help you do your own taxes, big box tax preparation services like H&R Block and Liberty Tax have been seeing fewer people with simpler tax returns coming through their doors.

But now that you’ve started a business, should you hire a tax preparer? The short answer to this question is “Yes”. But we’ll go through some reasons why it is so important to have someone helping you with your taxes when you start a business.

Whether you are jumping right in and starting your business full time or are working on your business as a side hustle in addition to your full time job, when you start earning money in your business, you have different considerations than you do when you are someone else’s employee.

Here are the reasons it’s important to work with a tax preparer when you become a business owner instead of trying to do-it-yourself.

1. You could actually be losing money by doing it yourself. You’re trying to save a few bucks because you just started your business and money is tight. But you could be costing yourself more. A good tax preparer is trained to understand confusing tax codes. I don’t think there’s anyone out there who would say that tax codes are straightforward and simple to understand.

A tax preparer will be able to help you minimize the amount of money you pay in taxes. And I’m not talking about some shady or unethical tax treatment. It’s easy to overlook deductions you’re entitled to if you don’t realize the deduction is available to you. And when you don’t maximize your deductions you’ll pay more in taxes.  I’m going to go out on a limb and say that most of us already feel we pay more than enough in taxes. Couldn’t this money you save because your tax preparer is on top of it be used another way in your business?

2. You’ll have more assurance that your tax return is correct. Again, back to the confusing tax code. I know that do-it-yourself software presents you with interview questions to help you prepare your return. But can you honestly say you haven’t breezed past some of them because you might not have understood them or knew if they were applicable to you?

When a tax preparer prepares your return, you’ll have some assurance that you have someone who’ll stand behind their work. If anything is ever questioned, you’ll have someone who knows the tax code who can help you discuss your return with tax authorities. And in the event there is ever an audit of your return, your tax preparer will be able to assist you through the audit process.  

3. And finally, a tax preparer will be able to sit down with you and talk about what you have coming up in the next year. They’ll be able to help you understand how decisions you make will affect your taxes so you can make the best decision. They’ll be able to help you understand your tax liability for the upcoming year and make sure you are paying taxes due when they should be paid to avoid interest and penalties.  

Engaging with a tax preparer as you start out in your new business will help you avoid costly mistakes on your return and you’ll have someone who can guide you through the complex tax code. When you’re starting out, money is usually tight but cutting corners by doing your own business taxes isn’t the best way to try to save money. You could end up with more headaches in the long run.

Tell me what you think. Do you have a tax preparer or have you decided to do it yourself? Do you see value in having someone help you through the complexities of business taxes? I’d love to hear your thoughts.