A Letter to Entrepreneurs
To all you small business owners who I so admire:
Please don’t check out because I mentioned PAID preparer. I get it. I really do. As a small business owner, you are pinching pennies and reinvesting in yourself and your business just waiting for the day a post goes viral and you become an overnight success.
Well my friend, I hope that happens for you soon, really soon. And when it does, don’t forget about me – the virtual accountant who wished you the utmost luck!
But, whether you’ve had that viral post or you’re still waiting to hit the gold mine, the fact of the matter is you’re an entrepreneur and you should NOT be filing your own tax return.
Just yesterday, I shared a post with the IG community (you can follow me here) about my #1 tax tip. It’s too good (read between the lines there: it’s too real and more people need to be warned) not to share again. So here it is…
There are a million other stories like the one above plus plenty more that suffered worse consequences, such as unintentional audits and costly mistakes. As a favor to all of you who need a little more convincing, I dedicate this post to you!
I was tempted to title this post “840 Reasons to Use a Knowledgeable Preparer During Tax Season” because on average, tax professionals find an additional $840 of tax savings than self-prepared returns. $840!!! And, to be completely honest, that was the average in 2018. With more and more small businesses opening I wouldn’t be surprised if that number has grown exponentially.
But alas, I decided to go with a different title because I didn’t think many readers would be inclined to read a list that long. In reality, the list would look something like this:
Obviously that list is rather sarcastic, and, if I’m being honest with myself, you likely didn’t read this far just for sarcasm. My apologies. Here’s the truth of the matter…
7 More Reasons
There are SO many advantages to working with a knowledgeable tax preparer. To name a few:
1. MORE KNOWLEDGE. LESS MISTAKES.
If you find the right preparer, they’ll have tax education, experience, and training. With a better comprehension for tax laws, the window for error is significantly reduced. Keep in mind though, not all preparers are the same. It’s important to find a communicative, competent, and law-abiding tax preparer to ensure your financials are in good hands. Why? Because the same return that is self-prepared, prepared by an amateur preparer, and prepared by an experienced professional, can yield significant differences.
2. MAXIMIZE CREDITS
Not only can an experiences professional help reduce the likelihood of mistakes, they can also help maximize credits. That’s right. Credits are not a flat figure. They are actually based on calculations and fluctuate based on inputs. It’s completely legal to strategize your deductions in order to create more advantageous credits.
3. INCREASE DEDUCTIONS
Okay, maybe an accountant can’t actually increase your expenses, but they can pull from their repertoire of experience and help your brainstorm expenses you may not be utilizing. This oversight of unknown deductions applies to many taxpayers including, but not limited to, teachers, students, and those who own a home, rental, or business.
A common example of this is factoring the costs vs savings of retirement contributions. If you invest $500 into a retirement account, you may save $100 – a 20% savings. If you invest $1,300, you may save $390 – a 30% savings. And similarly, if you invest $2,500 you could save $550 – a 22% savings. Accountants are trained to assess multiple scenarios and work with their clients to determine the most favorable outcome.
4. EASE THE BURDEN.
Navigating your way through a complicated tax return is stressful and time consuming. In fact, even simple tax returns can be overwhelming without the correct software or training. And as much as google may be your best friend, googling tax laws can leave you with more questions than answers. Passing the burden of tax preparation to someone else can relieve a lot of anxiety and self-doubt, not to mention the amount of time saved.
5. PROFESSIONAL ADVICE
Similar to the points above, competent preparers can do much more than just input numbers. They can offer professional advice to help you strategize and put more money into your pockets. Often times the most beneficial strategy sessions happen prior to year-end. This is call tax planning. Your accountant can calculate benefits of selling stock now vs later or determine if your business could save taxes by buying a piece of equipment before the year ends.
6. PEACE OF MIND
Audits are stressful and always seem to come at the worst possible time. Having a professional prepare your return does not, on its own, lower your audit risk. However, the combined effects from the benefits listed above, namely less mistakes and legitimate deductions, does.
7. AUDIT REPRESENTATION
Even if your return is completely accurate, there’s still a chance you may be part of the 1 million filers audited in 2019. If you used a paid preparer, they are already aware of the factors contributing to your return, mostly because they prepared them! They can represent you during an audit and make the process less intimidating. In fact, a number of preparers will actually guarantee their work by accepting liability in the event of an audit.
Trust the Facts, It’s Worth the Investment
So now, the next time you wonder if a paid preparer is worth the investment, feel free to run through this list of 847 reasons why you should always work with a competent accountant during tax season.
Remember, while hiring a preparer may be more money upfront, it’s practically guaranteed that there will be more money in your pocket in the long run.