08 Mar Is it worth hiring an accountant to do your taxes?
Hiring an accountant to file your tax return has many advantages
It’s a question that comes up time and time again: is it actually worth paying somebody to do your taxes? Or should you just do it yourself?
As someone running a business, figuring out what you owe in taxes is critical. Not only do you need to maintain your competitive advantage, but you also need to ensure you file correctly and according to the law.
Most people’s lives change so often these days that figuring out whether your business should use an accountant is a decision you must make.
If you own a business, tax requirements tend to be much more stringent compared to being self-employed. You often have to spend hours gathering records and ensuring your account for all your expenses.
If you’re not comfortable with navigating all your business-related tax forms, then you will usually need to consult with a professional. Doing it by yourself puts your business at risk of an IRS audit, fines, litigation, and other penalties.
In general, there are two ways that you can prepare your taxes.
The first involves using tax software or filling in your information via the IRS website. The tax authority doesn’t charge you to file your taxes, but it won’t hold your hand either. Many people with simple tax situations who earn less than $72,000 per annum use the IRS portal at their own risk. However, as a business owner, it is highly likely that your financial situation is more complex and the sum of money much higher.
The other option, therefore, is to hire a tax preparation company – preferably a qualified accountant to do the work for you. Prices are reasonable and they allow you to save both time and energy worrying about whether you’ve filed your taxes correctly or not.
Usually, it’s worth hiring an accountant if you:
- Run a business and need to maximize expenses
- Have a complex tax position that includes both regular and dividend income
- Do not have time and patience to work out how much tax you owe
- Do not understand the intricacies of complex tax law in the US
- Have charitable contributions, significant assets, and investments
- Want to itemize your deductions
- Have been through significant life changes in the last year, such as buying a business, had children, married, or bought a property
How much should you pay for tax preparation?
According to the National Society of Accountants Reports on Average Tax Return Preparation fees, the average cost to have a professional do a Form 1040 Schedule C for business is around $184. You’ll also pay an average of $124 for a Schedule D (gains and losses).
Schedule A costs tend to differ quite considerably by region. If you live in the east south-central area, including the states of Alabama, Kentucky, Mississippi, and Tennessee, you’ll pay around $210 for a Form 1040 with a Schedule A and state return. However, if you’re on the Pacific coast, you’ll pay closer to $329.
Advisors set their prices according to a host of methods.
One approach is to set a fixed fee for each tax form or schedule they complete. Another is to simply charge you whatever they charged you during the previous year.
Some will offer a value-based fee. These prices usually relate to the hours of labor they put into preparing your taxes and filing them. They may also charge a minimum fee and then add to this if there are additional complications.
In summary, if you operate a business, it is worth hiring an accountant to file your taxes. Relative to the hassle filing yourself creates, the costs are minimal.