Filing your business taxes: Do you really need an accountant?

Thanks to the number of software programmes now available and the ability to file online, several people choose to go it alone with their tax preparations. In fact, the latest data from the IRS indicated that around 50.5 million taxpayers turned to tax-prep tools in 2017, with many choosing to watch TV or browse social media while working on their return.

But this year, many do-it-yourselfers were left feeling confused due to the recent Tax Cuts and Jobs Act, which meant tax forms looked different and various rules changed. Forty percent of self-filers even said that they thought they’d left money on the table because they didn’t understand which deductions and credits were allowed.

So, when it comes to filing business taxes, surely an accountant would be the best option? Here’s what you need to know.

Why use an accountant?

Morgan Stanley famously advertised, “You must pay taxes. But there’s no law that says you’ve gotta leave a tip.” In other words, tax avoidance is illegal, tax minimization isn’t.

Many businesses choose to use an account for this very reason alongside the following benefits:

• Understanding of tax code – There are 74,608 pages in the tax code. The average Bible has around 1,200.
• In-depth expertise – It takes around eight years of study and experience to become a certified public accountant.
• Knowing about law changes – The Tax Cuts and Jobs Act of 2017 is a perfect example.
• Knowledge of local area – If your business collects sales taxes from customers in another state, you’ll need help.
• Safety net – The IRS works under the guilty until proven innocent concept.
• Business acumen – Business owners rarely ditch their accountant because they know the books better than anybody else.

Knowing when to go it alone

What if you’ve got some accounting experience or can’t justify paying someone to do your business taxes? Going it alone does have a few advantages, but managing to do your tax preparations successfully will ultimately depend on your business type and its complexity.

“Business filing requirements range from submitting an additional form or two with your personal tax return to a completing a corporate income tax return,” says Jean Murray, business law and taxes expert.

“Look at the tax form that’s appropriate for your enterprise and decide what information you’ll need to complete it and where you’ll get it. Most will come from your financial statements, including your balance sheet and income statement.”

Sole proprietors and one-person small businesses have it relatively easy, as they can complete Schedule C to calculate their business incomes and include this form with their personal tax returns.

However, partnership multiple-member LLCs are more complicated because they involve both a separate business tax return and a statement on Schedule K-1. Partners must also file the Form 1065 tax return.

It all comes down to how confident you are in your own ability to file taxes for your specific business entity. Accountants come with several advantages, many of which outweigh the boons of doing it yourself.