(Part I of a II Part Series on Professional Tax Filers and Small Businesses)
I offer coaching & educational services that help entrepreneurs, solopreneurs & small business owners understand their accounting & taxes, maximize their tax savings, and increase prices.
My work focuses on empowering you, the business owner, to make business financial decisions from a place of understanding, light & power.
As such, I’m often asked:
Do I really need to hire a CPA to file my taxes?
Can’t I just use Turbo Tax or get my bookkeeper to do this stuff for me?
The short answer is you probably need to use a CPA or an Enrolled Agent (EA) to file your taxes.
Here’s why I recommend this to my clients:
CPAs and EAs are real licensed experts
CPA’s are licensed by state governments and EAs are licensed by the federal government.
To earn either of these licenses, candidates must pass a series of tests with low pass-rates. Once they pass all and earn their licensure, they then must regularly complete additional training so they’re up-to-date with new state and federal requirements.
CPAs and EAs can represent you to the IRS
If your business is ever audited, you will probably need someone to represent you before the IRS. (You’re allowed to represent yourself, but many people are not comfortable doing so as they, personally, don’t have a strong grasp of tax law or experience representing themselves.)
The IRS allows both licensed CPAs and Enrolled Agents to act on your behalf. During a business audit, the best person to represent you is probably going to be the CPA or EA who filed your taxes. (After all, this person is already familiar with your tax return, and has already attested that it was complete and accurate, and so he or she is usually in the best position to represent your interests.)
Now what about TurboTax?
You know what? I love TurboTax! Yes, really I do!
For years I used this for my family’s personal taxes – it’s easy to follow, cost effective and really covers all the bases.
HOWEVER, if you have a separate business entity (think LLC, partnership, or S-Corp), I would recommend skipping straight to the licensed professional – at least for the business entity’s taxes.
Why? Well, a lot of things need to be carried over from year to year in business taxes – and I don’t think TurboTax’s software is as intuitive when you try to enter a S-Corp return. Basically, there is a TON of room for error for business owners who don’t know what they’re doing (you know, when you’re just trying to save a few hundred as you enter data into software while lounging in pajamas).
For all the headache that trying to get a LLC’s info into TurboTax will cause you (assuming you can get it right), I say skip it.
So, what about you?
Is hiring a CPA or EA a step your business needs to take? If so, check out Part II of this series, which has tips on how to pick a great licensed tax professional.