Whether to use an accountant or tax software isn't necessarily a question of exclusion; each have their advantages, and depending on your own level of comfort and familiarity with filing procedures, you may choose one or both.
Mark Tenenbaum, senior product manager for Intuit's TurboTax and MacInTax for Business, says, "I would recommend that every small business owner do their own taxes, but that's not to say that some wouldn't want an accountant to review it. They really should do it themselves. The insight and understanding they gain is invaluable, and will help them to understand the process better.
"We have a large group of customers who do not use accountants at all. Many have prepared their own returns in the past. There are others who used to use an accountant and have switched away. There is also a large group who use the software and also an accountant."
Tenenbaum says that if you plan to use software to file, you'll need to know what tax forms your small business will be filing. As a first-time business owner, checking with an accountant may be a priority in this case.
Judy Zone, an accountant with the central New Jersey accounting firm of Weisman & Company, CPAs, LLP, suggests that it is especially important for the the first-time business owner to use an accountant during his or her first year of filing corporate taxes.
"Most people in a small business should be more concerned with getting business into their firms than getting to know tax laws that an accountant would know off the top of their head," Zone says. "Using a tax professional would put your priorities where they belong."
She explains that, when you are first starting a business, an accountant can recommend the type of legal structure, such as a sole proprietorship or S-corporation, that would be most advantageous to you when tax time comes around. The accountant would also analyze other potential problems that an enterprise may encounter, such as questions of liability.
An accountant can also provide you with systems for making tax-time 1997 easier. In this sense, the tax preparer's fee can more than pay for itself. Zone says that an accountant proves his worth by showing clients "legal ways to pay a minimum of tax."
In fact, while Ketschke has been doing his own corporate tax filing for four or five years, he started out by having an accountant prepare them for him.
"By now, I'm aware of all the deductions I'm allowed to take," Ketschke says. "The problem I originally had was that the 1120S form was made out for accountants to fill in. As a small-business owner, I had problems figuring it out, and if you put a number in the wrong place, the IRS will come down on you. Now, by using the program, it's much easier to understand."
Tenenbaum agrees that the business software that was released in 1996 by Intuit is designed for someone who doesn't necessarily have a deep understanding of tax laws. The program takes the user through an interview that gathers information from them, and then places that data in the proper lines on the tax form.
"You do not need to be a tax expert to use the software," Tenenbaum says. "The process is built into TurboTax. You don't even need extensive computer or software knowledge; the program will walk you through the entire process. There's a help system that is context sensitive and is keyed to every line.
"In addition to the interview process, there's a feature called Tax Advisor that pops up with advice and information, like recent tax changes, areas scrutinized by the IRS and tax savings suggestions," adds Tenenbaum.