Businesses large and small often find tax time to be stressful. A successful business needs to find every way it can to save money. Tax time is a great time to take advantage of deductions and keep money in the business to help it grow and prosper.
What’s the best way to take advantage of tax time though? The proliferation of tax software has now allowed many business owners to take more control of their taxes and accounting. While this may seem convenient, more businesses than ever are taking advantage of accountants and accounting houses. Which is the best option for a business? It really depends on the type of business they are. Finding the right option can save hundreds, thousands or potentially millions of dollars depending on the size of the company.
Common Options in the Debate: Software or Accountants?
Tax Software Alone
The first option for a business is to simply do their own taxes. Software like turbotax, TaxAct, FreeTaxUSA, TaxSlayer, H&R Block Deluxe and Liberty Tax allow a company to do their own taxes. There are a lot of benefits to using tax software.
The software comes pre-programmed to recognize and suggest deductions that you may not otherwise know about. A new version of software is released for every tax year, but as long as you are using the same brand, your previous returns will carry over.
Advantages:
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Relatively Inexpensive - Purchasing tax software is not a big strain on small business owners. Typically the purchase price is much less than a return prepared by an accountant.
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Perfect Math - Using software means there is no potential for mathematical mistakes that could occur when performing a return by hand.
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Catch Deductions - As tax software changes each year, it’s designed to notify a business owner if they are missing out on a tax credit or valuable deduction.
Disadvantages:
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Potential Support Issues - While tax software will have support in terms of online and phone, they may not be that useful. These support techs offer support for using the software, and not for actually completing your taxes.
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User Reliant - Tax software can be great, but it is still depends on what a business owner inputs. If the business owner’s numbers are off, then the tax return will also be incorrect. This can lead to potential audits.
Individual Accountant
There are many small accountants who have chosen to go into business for themselves. It’s the perfect choice for accountants who do not feel comfortable simply being a cog in a large accounting firm.
Advantages:
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Knowledge - Accountants provide an additional level of knowledge. This knowledge combined with tax software will often result in a better return.
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Service Anytime - Accountants can help advise a company throughout the year. Decisions that may affect taxes at the end of the year can be made with their assistance at the start of the year.
Disadvantages:
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Same Software - Most small accountants are using the same tax software that
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Increased Cost - While still cheaper than using larger firms, an individual accountant will cost more than merely using a tax software.
Chain Store Accountants
There are many large stores and firms that offer people the ability to walk in and get their tax returns filed immediately. These stores have been around and successful for years.
Advantages
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Better Software - Chain accounting firms like H&R Block that work on fast returns will often pay far more for their software. It’s more sophisticated than any sort of personal software.
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Fast - Using a chain accounting firm will often result in incredibly quick tax filing. Many of these will pay back a return immediately if it’s found that a business is due one. This immediate payout is available for a fee and endorsing the eventual return over to them.
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Many Locations - These tax chains have locations seemingly everywhere. During tax season, they will often open up temporary locations in big box or office supply stores.
Disadvantages
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Fast - Just as it’s convenient for taxes to be filed quickly, there’s the potential to miss things by working so quickly. These accountants have a huge number of tax returns to file, so they have no choice but to work quickly.
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Less Contact - Accountants working for a chain will often not have time to spend with someone individually when they have questions. This lack of a personal touch can be disappointing to business owners.
Accounting Firm
The final option is to go with a larger accounting firm. These will often be corporate accountants who spend their entire day going over the minutiae of the financial aspects of large businesses. These are intended for larger businesses.
Advantages:
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Thorough - Accounting firms will put the most effort and detail into each return.
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Specialization - Accounting firms will only use accountants that have specialized in business. Most will have accountants with specializations in the various fields that their clients may come from. This ensures no stone left unturned for potential credits.
Disadvantages:
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Costs - Using an accounting firm is typically the most expensive way to file taxes. The firm may use multiple accountants for each client. In addition they also need to pay for their premises and business. Quality can be expensive.
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Communication - A good firm will have easy communication between clients and accountants. Some large firms can sometimes find individual accountants hard to reach for those clients. THey may need to speak with several junior accountants to reach the more experienced ones.
Software or Accountants: Facts To Know
Choosing between tax software or an accountant can seem difficult, but it often comes down to the size and profitability of a company. A company in a good financial state will be able to afford a little extra for a flawless tax filing. Smaller businesses are more likely to turn to software. Business owners should consider these facts.
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A CPA is an Upgrade - While there are many accountants, the elite accountants have earned their stripes and the title “Certified Professional Accountant”. These accountants have passed additional testing and licensing.
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Size Matters - The size a business is likely going to play a factor. Large businesses are not going to assign their tax preparation to a single person within the business. Small businesses will often have the most difficulty in making a decision.
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IRS Interaction - If a business or owner has had previous interactions with the IRS, it makes more sense to potentially hire an accountant. Certainly going through more than one audit is not a comfortable experience.
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Technological Comfort - Another aspect for a business is their comfort using software and technology. A business that designs and develops websites is likely to be more used to using software than a business like a dog groomer.
