What Are the Pros and Cons of Hiring a Tax Professional for My Small Business?

When tax season is approaching, it’s common for small business owners to wonder about the different options they have to file taxes and if it’s worth hiring a professional tax preparer to make the process easier. 

While the cost of hiring a tax professional is an extra expense, it can help reduce stress and allow you to spend more time focusing on running your business. Is it the best idea for you? Here’s a review of the pros and cons to help you decide. 

What Are the Benefits of Hiring a Tax Professional for Your Small Business?

Some of the common benefits you’ll get from hiring a tax professional to help with small business tax filing are: 

• Expertise and compliance: Legal compliance and accurate reporting are crucial for small business taxes. It doesn’t help that changing tax laws can make the process more confusing each year. Tax professionals are highly trained and stay up to date on local tax regulations to avoid any costly errors. 
• Strategic planning: Hiring a tax professional can help with more than just filing. They can also be a strategic resource that helps with proactive tax planning, such as helping you choose the right accounting methods for your industry, managing quarterly payments, and planning for expenses ahead of time.
• Save time and resources: Tax planning and preparation can take up a lot of time and resources for small businesses. That’s especially true with any complex financial situations that need to be handled. Tax professionals can make the process more efficient, freeing up resources for use elsewhere.  
• Making accurate deductions: It’s common for small business tax deductions to trip up a lot of business owners. What deductions are actually appropriate for your situation? Rather than stressing over it and trying to do the research yourself, it can help to lean on a professional with expertise. 
• Choosing the right business structure: The legal structure of your business (sole proprietorship, partnership, S-corp, or C-corp) can affect how you’re taxed. Tax professionals can offer guidance so you can choose the right structure to optimize your tax situation. 

What Are the Cons of Hiring a Tax Professional?

One of the main drawbacks of professional tax preparation is the cost. Working with a professional will likely cost more than using tax software to do it yourself. However, when small business owners consider how it’ll free up their time and resources, and how effective planning optimizes their tax situation, it can well make up for that higher upfront cost. 

Another potential downside small business owners worry about is becoming less engaged with their finances when they hand over tax preparation to someone else. It’s common to wonder how that’ll affect your decision-making moving forward. That said, you can find tax services that are willing to partner with you and help you understand why certain tax-related decisions are being made so you continue to feel involved throughout the process. 

Lastly, you are dependent on a tax preparer’s availability during tax season, so it could be harder to get a last-minute appointment during peak tax season. But when you plan ahead and partner with a well-rounded service, it becomes much easier. Your tax preparer can work with you throughout the year so you’re ready to file on time and not scrambling at the last minute. 

Are Tax Preparers Worth the Cost?

Tax preparers can be well worth the cost for small business owners, especially for any complex financial situations. Those who want to reduce the stress involved, plan effectively, and optimize their tax situation as much as possible will find many benefits in paying for the expertise of a tax professional. 

When Does It Make Sense to Hire a Tax Professional for Your Small Business?

To help with your decision, here are some common signs that hiring a tax professional for your small business is a good idea: 

• Your business has grown, or you’re planning to scale it soon
• There have been significant changes in tax laws since you last filed
• You’ve completed any complex financial transactions like selling business assets, merging with another company, or international sales
• You’re having trouble finding time or resources to handle taxes on your own
• You plan to change your business structure soon
• You feel worried about compliance or making the appropriate deductions
• You want to optimize your tax situation as much as possible

Many of these can arise for small businesses from year to year, so it’s often a good idea to work consistently with a tax preparer to ensure you feel confident in your decisions and manage everything correctly. 

What Are Your Alternatives to Hiring Professional Tax Preparation Services?

The main alternatives to professional tax preparation services for small businesses are using tax software that helps you file on your own or manually filling out the tax forms yourself. 

Tax software can be a lower-cost option. However, when you compare tax software vs. tax professionals, you will get fewer benefits with the software. Tax software creates a straightforward process to file, but it doesn’t help with planning for tax season or quarterly payments, or make recommendations to help optimize your tax situation. You also still have to complete the entire process of filing on your own, so it doesn’t save as much time. 

DIY tax filing, where you manually fill out the forms, is another option where you can avoid tax preparation costs. However, that introduces a lot more complexity since you need to know what everything on the forms means, how to fill them out correctly, and manage all the legal aspects on your own. 

In many cases, professional tax preparation ends up being a lot easier and will help small business owners feel much more confident in their tax-related decisions. 

How We Can Help at Milestone

At Milestone, we offer remote tax preparation services for small businesses and startups. Our goal is to partner with small businesses and help you manage the process each step of the way. With our expertise, we can help guide you to plan for expenses, optimize your tax situation, and manage any new tax laws or business changes from year to year. 

Additionally, we offer more than just tax preparation. We also provide accounting, CFO, HR, and payroll services. We can act as a comprehensive back-office partner to assist with any needs you have as your business grows. 

Ready to optimize your tax situation? Contact us today to learn more about how Milestone can help.