Categories: Real Estate Resource

Tax Season – Hiring a CPA

The end of the old year and beginning of a new year means that tax season is upon us. If your business grew significantly in 2016, you should be considering hiring a CPA to minimize your tax liability and maximize your bottom line profit. If last year, you concluded more transactions or increased your top line cash flow, you want to make sure as much as possible flows down to the bottom line after expenses and taxes are accounted for.

Expanding your business to the next level quite possibly means taking your tax preparation process from “do it yourself” to “my time is more valuable” and I can reap more financial benefits by having it professionally prepared. There are pros and cons to DYI or having it professionally prepared and now is the time to decide which is most appropriate for you.

Pros to Preparing Your Own Business Tax Returns

Even if you prepare your own, most people use one of the “big box” tax software programs that are widely available. This allows you to prepare your taxes on your own schedule instead of having to wedge your need into a CPA’s busy schedule. If you’ve previously prepared your own, you know that you first have to get all of your relevant paperwork organized. This needs to be done whether you do it yourself or have a tax professional do it. And of course, there will always be a few documents that you miss the first time around. You can either hunt these documents down when you make time in your schedule to prepare your own taxes or do it on-demand when a professional is in the middle of your taxes and has to have that document right away.

Another major reason to do it yourself is that you have complete control over your data and security. You won’t have the person that may need to represent you to the tax authorities knowing all of the details that went into your filing. You can also attempt to squeeze every last nickel out of your expenses, deductions, tax credits, and every other tax minimizing opportunities you can find. Neither will you have to try convincing the tax preparer to include a deduction or exclude income that he or she is apprehensive about.

You can prepare your returns for less than $100 but at the cost of your own time.

Cons to Preparing Your Own Business Tax Returns

Unless you have prepared your own tax return several times related to the same business type, you probably don’t know the technicalities of the tax code relative to your situation. Of course, on top of that, the tax code is constantly changing.

Thoroughly learning and staying on top of the tax code can take hundreds of hours in research. The IRS publishes average approximate times it takes to research and complete each form. For example, schedule E takes less than 6 hours but the associated forms bring the total time to about 50 hours (form 4562 takes another 38.5 hours and form 8582 takes about 4 hours). When you do have a question, you have to rely on a temporary support team for answers instead of a fully qualified CPA.

If you make a mistake, it can be costly in terms of IRS and state penalties along with ultimately having to hire a CPA to straighten it out.

The most common reason given for preparing your own tax forms is to save money (second is staying in control and better understanding your business taxes). However, preparing your own tax returns often results in costing more money than you are saving because of the opportunity cost of your time.

Please leave a comment if this article was helpful or if you have a question.

Author bio: Brian Kline has been investing in real estate for more than 35 years and writing about real estate investing for 10 years. He also draws upon 30 plus years of business experience including 12 years as a manager at Boeing Aircraft Company. Brian currently lives at Lake Cushman, Washington. A vacation destination, a few short miles from a national forest. With the Pacific Ocean a couple of miles in the opposite direction.

Brian Kline

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