Sunday, October 5, 2014

Using a CPA for taxes is cost effective

Paul Greenwood for AZDailySun.com writes: Question: I’ve had my small business for several years and have always worked with my bookkeeper to do the taxes, but too late, I discovered that I missed a big deduction last year. I know it’s expensive, but does SCORE think it would be worth the money to have my taxes done by a CPA?

Answer: Many entrepreneurs say that they prefer to handle the accounting themselves, but 25 percent of them also admit cost is a factor. However, of those who use an outside accountant, most small business owners believe that it is critical to the success of their business.
Additionally, the majority who hire an accountant do this early in the life of their business. More than half of those who have an accountant hired him or her at start-up and an additional 13 percent did so within the first six months. More than half of those using an accountant had a personal referral and, for 17 percent of these entrepreneurs, their accountant is either a friend or family member. According to the Sage Small Business Accountants Usage 2013 Study, 71 percent of small business owners use the services of an outside accountant.
“The most significant benefits of paying for professional tax preparation,” says David Snyder, a Prescott CPA (DavidASnyderCPA.com), “are convenience and accuracy. The time necessary to read through and understand the IRS’s forms, instructions and publications, are hours that can be better spent growing your business. If you were to put a monetary value on your time, it would likely cost more than the professional tax services. Also, the very real possibility of errors on tax returns can be greatly minimized by using a CPA and that expert knowledge can also avoid overpayments by properly identifying all the eligible tax credits and/or deductions.”
Snyder advises purchasing tax preparation software as a good middle ground for those who don’t want to spend the money on a tax professional, but who also don’t want to go it alone.
“However,” cautions Snyder, “you need to keep in mind that a tax software program won’t always ask the right questions about your particular circumstances (such as your capital gains and losses). Primarily tax preparation software is designed for individuals with simpler tax situations, and is not well suited for taxpayers with complex finances. Additionally, these programs don’t provide you with the guarantee of representation against a potential tax audit ― a benefit that is included with most professional tax services.”
Snyder provides some considerations for determining if you could benefit from using professional tax preparation services:
  • Engaging a CPA includes more than preparing a tax return. It is acquiring a “partner” in your quest for financial security and having someone that can be relied on to answer important financial and business questions.
  • Personalized service for both your family and business gives you peace of mind knowing your tax returns are accurate.
  • CPAs give specialized advice and offer tips for the upcoming year.
  • CPAs price competitively and this helps minimize your taxes and increases your bottom line.
  • CPAs take a comprehensive look at your financial situation benefiting both business owners and stock investors.
  • CPAs are required to participate in continuing education courses and tax updates; keeping them current with important changes.
  • CPAs explain the special tax rules that apply to businesses including inventory methods, basis of accounting, start-up costs, asset acquisition, and tax credits.
The CPA can offer advice to maximize tax savings opportunities both for the return they are working on for current and later years.

3 comments: