Because of the size of most small businesses, 75% of small businesses are considered “pass-throughs”, meaning taxes are paid at the owner’s personal rate. This could be a serious burden for small businesses in their first years. If you’re not prepared to pay such a high rate of taxes, you might need to consider hiring a tax accountant.
When you’re an average person working a single job, filing individual taxes can be done fairly easily and take less than an hour. If you’re a business owner, however, you could have your assets spread out in a variety of ways, making it difficult to know what you can claim and what you can’t. A tax accountant will help you sort your personal finances from your business finances to your income.
Here are 10 reasons you should hire an accountant to keep your small business’s finances in order.
1. You’ll Save Time And Money With A Tax Accountant
As a business owner, there are so many issues you need to juggle on a daily basis. Tracking down and organizing invoices for every sale and transaction isn’t always the first thing on your mind. Between staffing, operations and inventory management, it can be easy to lose sight of how important it is to stay on top of your taxes.
A tax accountant could relieve you from the stress of handling all the odds and ends of your business. They might also find places where you’re mishandling or misplacing money.
Business owners can be so overwhelmed with the tasks related to running a business that they can forget to provide for themselves. It might not be the first thing on your mind, but your accountant can ensure that there is money going away for your retirement when it’s all said and done.
While your business plan might be strong, your ability to manage your finances efficiently might not be your strength. A tax accountant will make sure that you’re making smart business decisions every time money is gained or spent.
2. Tax Laws Change
This year, an extensive tax reform law was enacted that could have a large effect on your business. Staying on top of these changes is imminent and not taking the time to educate yourself on the changes will be no excuse if you get audited.
If you don’t have time to stay on top of it, you should consider finding a good tax accountant. They can ensure that you don’t miss out on any major payments or new exemptions. If you fail to pay enough, you could end up with a long list of penalties from the IRS.
Your accountant will know what changes will affect you and ensure that you’re in the safe zone when tax time comes around.
3. Your Business Is Brand New
When you start a business, you might be focused on one idea or how you want to change an industry. You might not be thinking about all of the minutia and boxes you need to check. There could be “i”s left undotted and “t”s left uncrossed, and they could leave your business in limbo after you thought you’d taken care of everything.
You might think that you’ll have high taxes to pay, with your individual payments on top of what the business accrues. If you qualify for that “pass-through” status, you could end up simplifying your tax return at the end of the year.
Self-employed people are entitled to some pretty big write-offs that you should be aware of. Having a tax accountant double check all of your work and look for mistakes could keep you from overpaying and keep you on the good side of the IRS.
4. If You Owe Back Taxes
If you or your business owes any back taxes, a tax accountant can help you square up your balance with the IRS. They will establish how much you actually owe, looking through old filings to make sure the amount the IRS claims you owe is accurate.
They can help you to establish a payment plan so that you don’t encounter any other problems in the future. When you’re just a small business owner facing a big government entity like the IRS, you could be overwhelmed. Your tax accountant can be an important intermediary to help you navigate.
Your tax accountant will stand up and fight on your behalf to ensure that you don’t overpay and that you don’t make the same mistakes twice.
5. Different Sources Of Income
If you’re the owner of your company taking another income as the CEO or taking a salary from another job, tax filing will be complicated. In order to ensure that you’re accurately filing everything, your tax accountant can assess your situation.
If you have more than one form reporting your income at the end of the year, you could have your work cut out for you. Your accountant can make sure you don’t have to go it alone.
6. Staff Isn’t Enough
While you might have good people working at your front desk, handling your payroll, invoices and day-to-day business, they aren’t accountants. For dealing with specific accounting needs, you might need to hire someone who knows how to handle your taxes.
Staffers who are tasked with handling your taxes as a secondary role will likely make mistakes. Those mistakes could cost you tens or hundreds of thousands depending on the size of your building. Making a mistake with the IRS could lead to an audit and cost you even more.
Going with a professional accountant is the only way to avoid this.
7. Your Company Owns Real Estate
If you own your building or other property, you might need a hand managing the tax responsibilities that come with owning property. There are unique tax concepts that are connected to renting, as well as some benefits you could be taking advantage of.
Knowing the ins and outs of real estate law might not be your accountant’s forte but they will likely know the tax-related benefits you could tap into. Ask your accountant what they can do to help you save and generate even more income with your properties.
8. Your Credit Affects Your Business
If you’re the sole proprietor of your business, your credit is your business’ credit. If your business needs a loan, your credit could make all of the difference.
Business owners who have already taken out some loans might need help balancing their payments to ensure that their credit score keeps climbing. To ensure that your bills keep getting paid and to find ways to get more loans to help your business grow and expand, hire a tax accountant.
9. Your Business Absorbed Another
If you are doing well in your industry, you might have the opportunity to absorb a smaller competitor. While this can be an exciting process where you have access to more resources, staff and services, it can have serious ramifications on your tax filing.
Talk to your accountant and make sure you’ve checked off all the boxes before you sign anything. While it might seem like you’re getting this business for a low price, taxes could make that cost multiply if you don’t play your cards right.
With all of the extra payroll, insurance and office space costs you could be facing, there could be a lot on your mind. There are staffing issues to deal with on a day-to-day basis as well as reimagining the infrastructure of your company and how all the moving parts work.
A tax accountant can be the perfect advisor to tell you what is possible and how much it will cost you.
10. Change In Leadership
If you’ve been through a change in leadership or if you’ve stepped up or down, you could see a shift in your tax structure. If you’re no longer the sole proprietor or you’re no longer employed by your company, you might need to pursue a different way of filing taxes than the year before.
Major company and personnel changes can be exciting. They can bring in new energy and new ideas, changing the direction of your company for the better. But the added stress of changing can be a challenge for even the savviest business owner.
Calling your tax accountant can help you prepare for any bumps in the road.
Think You’re Ready to Hire a Tax Accountant?
Being a part- or full-time business owner can take a toll on your personal life. You’ll come home each day feeling exhausted and seeking refuge from your family and friends. Handling your taxes on your own will make those moments few and far between.
If you’re ready to find the perfect tax accountant, contact us today.
Editor’s Note: This post was originally posted on February 21, 2018 and has been completely updated for accuracy and comprehensiveness.
Lety Rodarte, CPA
Senior Tax Accountant