We’re big fans of anything that makes life a little easier. One of those things is tax preparation software.
There are plenty of great options out there, like TurboTax and TaxACT. In the first few years of your business, these tools may have everything you need to file a clean tax return.
…Until they don’t anymore.
It’s like going from driving a regular car to trying to hop into the Daytona 500 alongside Dale Earnhardt Jr. At some point, you’re simply underqualified.
As your business grows, there will come a time when you need to hand over your small business’ tax preparation to an expert. Wondering if the time has come for you? Here are 7
signs you need a CPA.
When you’re flying solo, it’s fairly easy to manage your own books. There’s the company’s profit, your salary, and a few other line items to think about. If you’re working with contractors to help manage some of your workload, that’s pretty straightforward, too, because benefits aren’t
Things get hairy quickly once you start bringing on full-time employees.
Are you withholding the correct amount of taxes each month? You’ll need to think about payroll tax, social security tax, Medicare tax, and more.
Do you have worker’s compensation insurance? What about other things that are required by law for employers in your state?
Working with a CPA ensures you’re fully in compliance with the law where you live and that you don’t run into any scary surprises come tax time.
If you’re thinking of expanding internationally, drop what you’re doing right this minute and get the name of a good international tax expert.
Conducting business overseas comes with a host of unique tax situations that depend on countless variables: whether you’re taking profit back to the U.S. right away, whether you’re storing some of your profits in an overseas accounts and whether you’re subject to a country’s own income tax, just to name a few.
This is on top of dealing with the tax requirements you’re still liable for here in the U.S. If you’ve got your sights set on the global economy, you also better have a great CPA in your contacts list.
Why $200,000? Well, it’s a major threshold for getting audited.
According to Kiplinger’s, individuals who make less than that account for fewer than 1% of all audits. Once you hit $200,000, your chances of getting audited jump dramatically, to about 1 in 37.
After you reach a million or more per year in income, your chances of receiving a tax-related visit from Uncle Sam are about 1 in 13.
The more you make, the more you need a CPA.
You reach the screen in your tax program where it asks you about office expenses. You happily punch in that new computer you bought and click the ‘Next’ button.
But a few screens later, it asks you about office supplies. Wait—was the computer an office expense, or an office supply?
The biggest problem with one-size-fits-all tax programs is just that—they’re one-size-fits-all. They’re set up to manage a limited number of the most common tax scenarios. When you start getting outside of that box, you run into problems.
If there comes a point where you’re having doubts about the accuracy of your tax preparation software, it’s time to meet with a real, live human accountant.
What happens if you and your wife decide to up and move to Mexico for a year (hey, can we come?)?
Or, what if you buy office space? Maybe you decide to lease a portion of your building to another tenant.
If you’ve experienced a major shift in your life or your finances, you’ll want to consult with an accountant about the most advantageous way to handle it. In many of these scenarios, there are multiple ways you could legally handle the transaction tax wise. Don’t you want to pick the one that’ll leave you with the most cash in hand, rather than guessing?
According to the U.S. Tax Center, confusing a tax deduction with a tax credit is one of the most common tax errors made by people who self-file.
A deduction reduces your total taxable income. A credit is an actual dollar reduction to your final tax liability. Big difference!
If this is unclear, or if you think you may qualify for multiple deductions and credits, it’s best to consult an expert.
Remember at the beginning when we talked about those things that make life easier? By now it should be clear: a dedicated accountant is one of those things!
If you’re spending more than a few hours thumbing through receipts, staring at spreadsheets and banging your head against your keyboard trying to do your own taxes, do yourself and your business a favor and ditch the tax preparation software.
It’s something we hear all the time from clients: if they knew it’d be this easy, they would have hired an accountant a long time ago. If you’re wondering whether the time is right for you to work with a tax pro, this tax season might be the perfect opportunity to make the leap.
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