Tax season is hectic for all types of businesses. The rush to meet filing deadlines increases the likelihood of committing errors that might attract IRS scrutiny. Although it’s possible to file your returns in-house, it’s more beneficial to hire a tax professional. They provide long-term savings by identifying deductions, credits, and other strategies that reduce your taxable income. Need more proof? Here are some additional reasons to hire a business tax professional.
Business Taxes Are Complex
The tax code is not only complicated, but you also have to comply with local, state, and federal regulations. Some of the reasons for this complexity are varying income streams, business structures, and investment types. The government also uses the tax code to influence several social and economic systems, including home ownership, childcare, and employment.
Periodic sweeping changes to tax laws mean even tax experts have to keep up with new regulations. This takes time most business owners don’t have. With a financial specialist in your corner, you’ll have the resources you need to mitigate issues as they come up. Whether you’re self-employed, run a franchise, or a corporation, a tax professional can provide the expertise you need to remain compliant.
Maximize Credits & Deductions
Credits and deductions play a central role in your tax plan. They encourage your business to adopt policies that serve your interests and those of other stakeholders. The IRS extends these incentives to organizations that meet strict requirements. To take advantage of these, you need concrete evidence in the form of accurate documentation that proves you qualify. A tax professional can create and update the relevant statements within the desired schedule. Tax courts and the IRS generally prefer professionally-created paperwork.
While some people use the terms credits and deductions interchangeably, they’re two different concepts. The main similarity is that they both reduce the total taxes owed. Deductions reduce your gross income, which in turn reduces the taxable amount. A few strategies include funding retirement plans, buying equipment that qualifies for depreciation deductions, and writing off bad debts. It’s also possible to reduce your taxable income by making prepayments and increasing expenses such as purchasing new inventory.
The federal government uses credits to encourage your business to adopt particular policies. Examples are going green, working with minorities, and offering healthcare to employees. They’re part of the extensive General Business Credit, meaning you’re likely to be eligible for some. Your tax professional will use Form 3800 to compile all the credits that can benefit your business.
Errors Are Costly & Risky
Failure to involve a tax professional in your business dealings can result in costly errors. A common mistake is failing to attach documents that correspond with your business structure while filing returns. It’s also possible to skip quarterly and payroll taxes and forget to send 1099 and W-2 forms to employees. Other errors include:
- Underreporting or underestimating taxes
- Recording personal spending as business expenses
- Failing to keep proper documentation
- Applying for the wrong deductions
These mistakes could invite an IRS audit that is costly and disrupts normal operations. Although it’s possible to fix some simple errors, others attract heavy fines. In extreme circumstances, you could face civil and criminal fraud charges in addition to punitive monetary penalties.
Your Time is Money
Tax professionals help you save before, during, and after tax preparation. One of their key roles is tax planning, which they implement throughout the year as part of a long-term objective. They also help you save the time you’d spend keeping up with tax code changes such as 2017’s Tax Cuts and Jobs Act (TCJA). As your business advisor, they provide the best tips for running your company efficiently in a way that minimizes taxes.
Your tax expert can also help by preparing both business and personal taxes. In case you receive an audit notice, they’ll help you collect the necessary evidence and represent you before the IRS. All of these services allow you to prioritize more productive aspects of your business. Your overall savings and gains are significantly higher than the amount you’ll spend on hiring a tax professional.
Hiring a Business Tax Professional Brings Peace of Mind
Although various financial experts can help with taxes, it’s advisable to work with IRS-recognized professionals. In addition to being licensed to practice in your state, CPAs have comprehensive accounting, tax planning, and preparation skills. They also take part in continuous training to ensure their knowledge is up to date. Enrolled Agents are qualified to prepare your taxes and represent you before the IRS. You also receive crucial advice based on prevailing trends and the performance of your competitors.
Hiring professionals gives you peace of mind and a confident understanding of your financial position.