When it comes to running a small business, taxes are one more complication. While you can do it yourself, why should you? Using someone you know may work, but what if they make a mistake? Hiring a professional has a wealth of benefits.
What Are Tax Services?
A tax professional provides tax services. The Internal Revenue Service regulates their practice. And they are up-to-date on current tax laws. These laws change every year and can get overwhelming for small businesses. Yet, a tax professional is an expert in this and saves you time and money.
Tax services help you every step of the way. Before tax season, during tax season, and after tax season — their guidance is crucial.
What Do Tax Services Do for a Small Business?
Tax services provide help before, during, and after tax season. Instead of helping only when taxes are due, they are there year-round. Here are some examples of what they do for you:
Before Tax Season
A tax service provides insight into money-saving strategies throughout the year. If you are doing it yourself, by the time tax season arrives it’s too late to take advantage of the savings. Every quarter is ideal to discuss pertinent tax information with a tax service. A tax service also keeps up with changing tax laws and helps you navigate and adjust.
During Tax Season
Tax services are especially important during tax season. According to The Balance:
Your tax professional may also be your tax preparer. Doing the work of preparing your business tax return and your personal tax return. If you pay business taxes through your personal tax return, the same person should be doing both returns. This is so you can coordinate tax savings. For example, a loss on your small business taxes (through Schedule C) applies to your personal tax bill to lower your overall taxes. And lower business income means lower self-employment taxes. Those of which you must pay personally along with income taxes.
After Tax Season
After filing taxes, a tax service is still pertinent to your small business. For example, if you get audited by the IRS, your tax service is there every step of the way. Not only can they represent you at an audit, but they are also familiar with your filed taxes. Who better to help you than the professionals who did your taxes? A tax professional takes the anxiety out of an audit and protects your interests.
What Type of Small Businesses Should Use Tax Professionals?
Any small business can use a tax professional and benefit from it. Here are some examples:
Sole Proprietors
Self-employed individuals and sole proprietors are the same. This is where both the business and the owner are legally the same. As a sole proprietor the owner assumes the following:
-
Income
-
Expenses
-
Assets
-
Liabilities
Tax professionals can lessen the tax burden and business losses for sole proprietors and the following types of businesses.
General Partnerships (1065)
This is like a sole proprietor where the owners and business get the same treatment with the liabilities and assets percentage divided. This is according to the percentage each partner owns. For example, two partners have a 60/40 split. One partner owns liabilities and assets of 60 percent. The other partner has liabilities and assets of 40 percent.
Limited Liability Companies (LLC)
This is where the business and the owner are legally separate entities. For tax purposes, limited liability companies get the same treatment as partnerships. They have the title of being “pass-through” entities. This means that there are no taxes on the LLC’s income.
S Corporations (1120S)
Similar to limited liability companies, S corporations are pass-through entities. The taxes are more flexible and they are not subject to double taxation. S corporations are a separate legal entity from their owners.
C Corporations (1120)
C corporations work somewhat differently than S corporations. In this case, the corporation pays its taxes. It is then taxed on the owner’s dividends. C corporations are sometimes developing businesses. And they offer shares to investors in the company.
Nonprofit Organizations (990)
While nonprofit organizations do file income tax returns, there is a difference in that nonprofits do not pay any federal taxes. The business is must be recognized as a nonprofit turning over income to a charitable organization. The charitable organization must be legally recognized as such or as a nonprofit business themselves.
According to Score:
While all charities are nonprofits, not all nonprofits are charities.
The Bottom Line on Hiring a Tax Service
Let’s face it. You have enough to deal with when owning your own business. You worry over employees, making the right decisions, staying current, and making a profit.
According to an article in Forbes:
Meeting with a financial professional allows you to get all your ducks in a row. You can use this time to review financial statements, ask questions about deductions, and establish a timeline for your tax deadlines (you may pay taxes on a quarterly basis, for example). Meeting with a professional now will leave you better prepared to face both the new year and its tax season.
Tax services from Founders CPA ensure that your taxes are one thing you do not have to deal with excessively. They make suggestions on how to maximize your income. They also help find the best tax advantages while staying entirely legal. And if the worst happens and there is an audit, they are there to help throughout the process. A tax service has professionals that make dealing with taxes a breeze.
