Running a service business for 18 months now and tax season is approaching fast. Last year i used turbotax but I'm making more revenue now and have employees. Not sure if i should stick with diy software, or bite the bullet and hire a cpa.
The software is cheaper but I'm worried about missing deductions or messing something up. Anyone been in this situation? What's the sweet spot where professional help becomes worth it?
Small business tax filing: Should I do it myself or hire someone?
byu/Hernan312 intax
Posted by Hernan312
6 Comments
I think it’s well worth the money for your first year to sit down with a CPA/Enrolled agent to talk about business taxes so they can put you on the right trajectory for success. After that it’s up to you.
I’ve had people that had no clue even what type of business entity they should be.
Turbotax works fine until you hit complexity like multiple revenue streams or business expenses. Then the time spent figuring it out starts costing more than hiring a tax pro. I’ve had a love-hate relationship with turbotax over the years but I’m thinking its time I find a more suitable platform that saves my time.
Once you have employees and more revenue, it’s usually worth at least consulting a CPA. Software can handle the basics, but a professional can make sure you’re not missing deductions, properly handling payroll taxes, and avoiding costly mistakes. Even a one-time session to review your filing can pay for itself if it saves you from errors or missed credits.
former cpa here – 15 years in the business including 10+ as a partner. 23 years as a CFO which included reviewing fed and state (usually 30+) for compliance and accuracy as well as shareholders returns. i definitely found missed deductions/reporting in my review of those returns. but i also learned things i didn’t know as i reviewed them – changes to the laws that i hadn’t seen proposed or enacted
i wouldn’t consider doing my own tax returns at this point. too many changes, too many regs, too many things to track that i simply no longer stay current with. could i do my own return? probably.
but the funny thing about these diy tax programs, they compute based on what you input. if you don’t know everything, then neither does the software. further the programs are written by humans who also sometimes make mistakes that you need to circumvent
CPA here so I may be a little biased, but I have seen a lot of DIYer returns. Some of the simpler returns have been fine, but I have seen plenty that are incorrect/fraudulent. *In general,* I would say once you reach that $500K revenue mark, it may be time to start reaching out to CPAs, not only for tax, but for bookkeeping as well. This could change with entity type as well though. If you have elected to be taxed as an S-corp, I would say you should have a CPA no matter the revenue number.
It really depends what it is worth to you. Some people like learning about tax while still running their business so it isn’t worth it to them to pay a CPA. Some people would rather focus that time and energy on making their business better instead of learning accounting and tax. It is just like anything else, there are enough resources out there that I could learn how to replace the transmission in my car, but am I really going to spend double or triple the time to learn how to do so?
Even if you hire a CPA or use a software, the biggest rookie mistake is leaving bookkeeping until the last minute. Keep digital receipts, reconcile accounts monthly, and track mileage or other deductions as they happen: it prevents scrambling at year-end.