To Hire or Not to Hire? Professional Tax Preparers Pros and Cons
It’s April, and you are sitting at your desk looking at the mountains of receipts and documents. The tax season is almost over, and you are wondering how you’ll be able to file your taxes.
You had tried doing your taxes before and even bought the popular tax software, but it isn’t helping you, and you are wondering, “Should I hire a professional tax preparer?”
The scene you just imagined is not new for a small business owner. Every time there’s a tax season, you come across choices of hiring a pro or doing DIY taxes. So, let’s make things simple for you and take a deep dive into professional tax preparers’ pros and cons.
By the end of this post, you can see if the pros can save you from the tax meltdown.
What is Professional Tax Preparation?
Let’s start with the basics. Pro tax preparation refers to the service provided by CPAs and certified individuals/firms that can prepare corporate and individual tax filings.
These experts can steer your tax ship through the troubled waters, ensuring that your taxes are filed correctly, and you can take advantage of deductions and credits. The goal is to minimize your tax liabilities, so you can grow your business.
Many businesses hire a professional because of changing tax laws. You never know when the IRS or CRA will get in a mood and change tax laws. Also, many businesses don’t want tax penalties or audits. According to University of North Carolina research, about 56% of Americans rely on tax preparers.
So, if you are trying to manage a small business with a detailed business tax checklist, pro-tax preparers can provide you with peace of mind.
If you are interested in learning more, you can check out our detailed guide on why your small business needs tax and accounting services.
DIY Tax Prep vs. Professional Help
We were talking to one of our clients who runs an e-commerce store. She said she wanted to outsource tax prep as she isn’t good at math. That’s why she doesn’t want to even have a tax software. Although this sounds a bit quirky, she has a point. That’s how she hired Tangent Consulting.
The choice of doing taxes DIY or hiring a pro comes down to your budget, time, and your tax situation. If you are deep into tax audits, it’s good to hire a professional. They can manage everything from tax preparations to deductions and credits. They assure that your business doesn’t come under audit.
On the other hand, if you don’t have a lot of budget, maybe it’s better to learn a few accounting jargon. You can also use a tax prep tool like TurboTax or QuickBooks if you want to automate the process.
How to Choose a Tax Professional?
Before moving to professional tax preparers pros and cons, you select the right service or an individual for tax preparation. If you don’t know anything about tax preparers, it’s always good to ask friends or check online reviews. The good thing is that the CRA and IRS have broken down how to choose a tax preparer. So, if you want more info, you can check their guides.
Here are key factors to consider when hiring a tax pro:
- Look for their certifications like CPA, EA, or others. Also, make sure if they have a tax identification number. This makes them eligible to file federal taxes in the US. In Canada, they must have an SIN.
- Ask how long they have been preparing taxes and if they know about your industry.
- If you are hiring a firm, check their online reviews from sites like Trustpilot.
- Ask them how much they charge. Do they charge a flat fee or have an hourly rate?
- Ask them about their availability. Ask if they offer virtual tax preparation.
With that out of the way, let’s come to the pros cons cons of hiring a tax pro.
Pros of Hiring a Tax Professional
They Know the Tax Code
Taxes are complicated. It’s like understanding how the multiverse works in Marvel comics. For instance, in our previous post, we mentioned that the IRS treats capital gains differently. If you hold a property for less than a year, you can be charged higher than if you hold a property for more than a year. Going North, in Canada, you have to pay 50% of your capital gain tax up to $250,000.
But who has time to go over these complicated matters? The benefit of hiring a tax professional is they know all about the tax codes, the changing laws, regulations, and official guidance. By keeping track of all of these nuances, you get the deductions and benefits for your small business.
For instance, there are a lot of tax benefits for doctors, but if they don’t know about it or don’t know how to do the paperwork for it, they won’t be able to get them.
More Time Less Stress
Please answer the following before moving on. Would you binge-watch your favorite Netflix show or do your taxes?
If your answer is to do your taxes, you are a financial genie. But if you say binge-watching, then we completely understand. Even us accountants need to binge-watch sometimes instead of doing taxes.
The main advantage of hiring a pro service is that you save tons of hours, which you can use to grow your business. Thus, you get more time and less stress.
Advice and Future Planning
Whether you are running an S Corp or a small business, the right professional can offer their expert advice. They can tell you how you can maximize tax benefits for your business. They can figure out the average cost of LLC, S, or C Corp tax preparation.
They can even help you prepare for the next tax season by telling you how you can cut your costs to reduce taxes.
Talking about the future here’s a pro tip for you: As spring is the busiest time for a tax preparer, you should hire them in the fall (we are writing this in the fall 😊)
Cons of Hiring a Tax Professional
Price Tag
The biggest drawback of hiring a tax pro is the price. Professional tax proper services can be expensive, especially if you have a complicated tax situation. The average cost of corporate tax returns in the US and Canada can be $800 and above.
The price tag can be a major hurdle for a small business, as you are trying to manage other expenses.
But the question you should be asking is “Is the cost worth peace of mind?”
Not All Tax Preparers Are Worth it
Not every movie in a franchise is a hit (we’re looking at you, Fast and Furious). Similarly, not all tax preparers are worth the price. It’s important to do your research and find the best accountants or a pro-tax service that fits your needs.
If you hire the wrong person or a firm, they can make costly mistakes, and the IRS holds you responsible for errors, not the preparers.
Virtual Tax Preparation
If you think hiring a full-time tax preparer can cost you a lot of money, and you don’t want to do your taxes, you can hire a virtual tax prep service. These services provide, like tax software, provide a hybrid solution. They can prepare your taxes online and can contribute to other financial areas like budgeting, strategic planning, forecasting, financial reporting, and others.
You don’t need to go to Tahiti to look for such services, as we provide a complete package. We handle everything from corporate tax filings to tax resolutions. But that’s not all we offer a range of services and become your finance department, so you don’t have spreadsheet nightmares.
Final Thoughts
Now that you know the professional tax preparers pros and cons, you can decide if hiring a tax preparer is the right move? If you are looking for a stress-free tax season, hiring a pro is a good idea. But if you are on a tight budget, you can use tools like QuickBooks or learn a few accounting jargon.
Whichever route you choose, Tangent Consulting has got your back!
FAQs
Are tax preparation fees deductible?
Tax fees are not deductible in the US unless you are self-employed. However, they are deductible in Canada.
How much does a tax consultant cost?
The average cost for a tax consultant in the US and Canada is above $100, but the cost can be higher depending on the work.
Can you file taxes more than once?
You may file your tax return more than once, but only one return will be accepted by the IRS and CRA.
