Don't Let Tax Season Tax You
Are you frantically trying to figure out how to file your new company's business taxes for the first time? Has your company expanded and left you confused about which deductions you should take? If so, it may be time to get help from a tax professional so you can get back to doing what you do best--running your business.
Eva Rosenberg, Enrolled Agent, publisher of TaxMama.com and author of Small Business Taxes Made Easy, says small-business owners shouldn't give tax preparation a second thought. "Nobody in business for themselves should ever be doing their own taxes," Rosenberg says. "There's no way a business owner can anticipate all the problems that may arise." After more than 25 years of helping people file tax returns, Rosenberg has found that small-business owners who do their own taxes often make so many errors they get audited.
Aside from making errors, attempting to file your own tax returns can also result in added stress. Dr. Taffy Wagner, owner of JTW Publishing in Denver and several other companies, found in her second year of business that she simply couldn't handle the pressure of filing her personal taxes and those of two companies, in addition to maintaining a household. Wagner ended up hiring someone to help make sure she didn't miss any important deductions. "It just wasn't worth the stress of trying to do it all myself," Wagner says.
At this late juncture, if you're a small-business owner and haven't already compiled your taxes or met with a tax professional, the pros say your best bet is to file an extension immediately. Shannon Nash, tax attorney and owner of Nash Management Group in Sherman Oaks, California, says nobody has an excuse for filing late. "Get an extension right away," she advises. "They're much easier to file these days than they used to be. Don't try to rush and get your taxes done at this point; it's not worth the risk of being late."
If you've determined you need extra help, what should you look for in a tax guru? Josh Frey, president of Washington-based On Sale Promos, went through seven accountants until he finally got it right. Frey advises, "Find one person or one firm who's familiar to you and makes you feel comfortable. The best firms to work with are the ones that allow you to work directly with the person you're hiring." Frey found that smaller firms were more focused on his needs and, in general, respected him more as a small-business owner.
Rosenberg stresses the importance of selecting a professional who knows your industry. "Do your homework. Get involved with professional societies and ask people in your niche who've been doing business for five years or more and are making a profit who they go to for tax help. Chances are they're working with a tax planner who knows their stuff," she says.
There's also the issue of whether to use tax-filing software. Nash says popular software programs like TurboTax aren't necessarily good for small business owners. "If you're trying to use the TurboTax business edition, you better know what you're doing," she says. "Otherwise, you'll miss out on tons of deductions."
Keep in mind it's never too early to start planning for next year. In fact, you should be bookkeeping and tracking finances throughout the year. Nash advises her clients to start tax preparations in the fall and sends them a mock tax return in November. That way, they can start planning financially if they find out they'll most likely owe taxes. "2006 is gone, so make life easier for 2007," Nash says. "You can start now."
Five Signs It's Time to Get Help from a Tax Professional
Tax attorney Shannon Nash says to seek assistance if you find yourself in any of the following situations:
- You don't know which deductions you should be taking as a small-business owner.
- You're finding yourself stressed and overwhelmed when trying to file your business taxes.
- You have significant capital gains from stocks, selling a business or commercial real estate.
- You have income from several sources, such as consulting, royalties, rental income, interests in businesses, or stocks and bonds.
- You earn money in both the United States and another country.