Filing taxes each year might sound like a nightmare,especially if you’re already running a small business. The trick is obviously to understand and apply the do’s and don’ts, but working with your accountant or CPA throughout the year would certainly help you with taxes and make your business stable.
The fact is that you’ll have to answer some of the basic questions before preparing to file taxes for your small business.
Answering ‘what’ and ‘why’ you have to pay taxes in the first place despite running a small business and how do you plan on paying your taxes are some of the important questions you’ll have to sort out.
Whether you’re a sole proprietor, corporation, or running an LLC, the basics mentioned above rely on the structure of your small business.
Also, it’s important to remember that your business legally differentiates you as an owner. You and your business are separate entities.Furthermore, your small business is liable to prepare income tax returns,employment taxes, estimated taxes, and excise taxes. Similarly, C and S corporations are sometimes liable to prepare double tax.
Do I Need a CPA to do My Taxes for My Small Business?
It simply doesn’t matter how small your business is, the need for a Certified Public Account (CPA) is of utmost importance.
Avoid making decisions without consulting a CPA. Otherwise,you risk damaging or even losing your company in the long run.
An accountant could undertake numerous financial responsibilities for your small business, but the fact remains, hiring a CPA has its own advantages.
So, why acquire the services of a CPA instead of just hiring an ordinary accountant? To answer that question you’ll first have to understand the difference between a CPA and a common accountant.
The Difference between a CPA and an Accountant
Generally, all CPA's could be considered accountants, but not all accountants are qualified enough to be CPA's.
Accountants stick to Generally Accepted Accounting Principles (also called GAAP), that are set by the Financial Accounting Standards Board (also called FASB). CPA's, on the other hand, are also accountants but have passed a relevant licensing exam in a particular state.
Licensure
A professional CPA abides by all the relevant tax laws stipulated by a state.
CPA's have to comply with all the latest educational updates to maintain their license in a state. Moreover, the CPA exam could last for daysanalyzing complex tax and financial data. And that’s not the end of it as CPA's follow strict guidelines set forth by the American Institute of CPAs (AICPA) as well.
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Financial Analysis Expertise
Today, many small business owners do their own bookkeeping to maintain financial records with the help of QuickBooks Online.
The duties of a bookkeeper commonly include adding business income and expenditures on financial software, whereas an accountant is restricted to preparing balance sheets or PLS accounts. CPA's, however, could thoroughly inspect the very same financial records and advise you accordingly.
Also, keep in mind that not all CPA's specialize in small business taxes. But, almost all CPA's are still more qualified to understand and apply tax code than an average accountant.
The extensive evaluation done by the CPA's can even detect some of the basic mistakes in the financial reporting period. As a result, your tax return will be correct and could easily overcome the risk of presenting false information to the IRS.
To Assess Complicated Tax Laws
The skills of common tax preparers are limited as compared to a licensed CPA. Accountants are deemed common tax preparers by the IRS.Furthermore, CPA agents are separated on the basis that they’re more qualified to deal with tax issues for a tax identification number.
The wealth of knowledge that a CPA has regarding the ‘tax code’is incomparable. And it’s a major part of a CPA’s licensing exam to remain up to date.
Performing IRS Audits
Only CPA's can represent you before an IRS audit. And this is all the more reason why you should hire a CPA to handle your taxes for your small business.
And if you are planning to hire someone to do the taxes for your small business, just make sure that individual has sufficient authority to represent and execute claims on your behalf.
An accountant can also prepare your tax returns, but a CPA can actually make more detail-oriented and analytical tax decisions for your small business.
Working Experience- CPA's
Seek the services of a CPA firm which can provide you a bookkeeper and accountant to perform routine financial tasks, while the CPA should solely perform tax and financial analysis.
The option to hire a bookkeeper to maintain your monthly,quarterly and annual financial reports is also there. And afterward, consult your CPA to do the taxes for your small business.
And the most common praise a small business owner will give to a CPA is how they help their business staff make real-time and sound decisions.
Having a collaborative effort with your CPA will allow you to make the decisions in a fast-paced working environment and overcome any hurdles.
Save Valuable Time and Energy
Although CPA's might cost more, they’ll get the job done. Ultimately this will end up saving your time that could be utilized to perform other important operations.
The misconception that a small business owner with a limited budget shouldn’t hire a CPA is also misguided.
All this energy spent on having to maintain your own financial records and forecast possible solutions can be exhausting if you are a small business owner. Besides, it’s something that no small business owner should have to endure alone.
And now, imagine the time and energy you could save once you hire a CPA.
Business Growth
By now, you should know how much a CPA can make a difference to your small business. And it’s more than just doing your taxes; it’s the value that a CPA can bring to increase your overall business growth.
A CPA can even help you determine certain areas of interests where growth is more likely.Additionally, a CPA can do wonders for your small business by simply analyzing the cash flow patterns and how inventory is managed.
