Let us begin with a simple question: who prepares your taxes? Many individuals and small businesses attempt to go it alone to cut costs, which can be problematic in a few different ways. Many times, you do not have sufficient time to prepare the documentation properly, so you opt for shortcuts that result in audited by the IRS. You might also make simple, unintentional mistakes because you are trying to balance your company’s financials and your daily business operations, leading to mistakes in your accounting. Though it will require an upfront expenditure, it will save you time, money, and future headaches.
Here are some of the many benefits that a tax professional can bring to the table for your business.
Making Estimated Payments to the IRS
Did you know that your company should be making estimated tax payments to the IRS? This should be occurring quarterly – four times per year – with payments due on the 15th of the month after the end of the quarter. Making these payments can help prevent a situation where you end up with a large sum of money due at the end of the fiscal year or after you file your yearly tax return.
If your company will owe (or you believe that you will likely owe) at least $1,000 at tax time, you need to file those estimated payments. The exact amount is based off of the money that your company has made during each quarter. Payments are made using special coupons and forms supplied by the IRS that are sent in to a specific address. Your tax preparer can handle all this for you, when provided with the proper financial records.
Filing Yearly Tax Returns
Tax return preparation, of course, also extends to filing yearly tax returns for your business. Hiring an expert tax accounting firm to handle this for you makes the process fairly painless, until you have to write a hefty check to the IRS, that is. A professional will gather all the necessary information from you, including things like your receipts, records of accounts payable and receivable, any expenses, bank statements, mortgage statements if you’re currently making payments on a company owned property, as well as anything else that will appear on your tax returns.
Once the forms and other documentation is gathered, the professional preparer will fill out all your tax returns using a computer program and digital forms provided by the IRS. An in depth understanding of tax laws, as well as the knowledge to fill out all documentation accurately, is required. After your taxes are complete, you will receive a notice from your tax preparer with all the information that you need to make and submit a payment to the IRS. In fact, your tax preparer may handle that as well for you, thus guiding you through the entire process, taking yet another task off of your very full plate.
Paying Your State and Local Taxes
In addition to handling your federal taxes and ensuring that your quarterly and yearly payments are made to the IRS, a tax preparer will take care of your state and local taxes as well. Depending on where you live, you may need to make quarterly payments to the state, county, city, or municipality. These payments, much like the ones made to the IRS, are based on your company’s quarterly income and projected yearly profits. Again, your tax expert will know how to estimate these amounts, as well as fill out the forms and assist you in making these payments.
This assistance extends to your yearly tax forms as well. All of those local entities, from the micro level (city) on up to the macro level (state) require you to file your taxes and make any required payments yearly as well. This can become quite complicated and tedious, as there are numerous forms to fill out and laws to understand, which all differ based on the various tax codes. You will need professional support and guidance while navigating the system in order to avoid paying unwanted penalties.
Understanding Tax Liabilities Based on Company Types
Depending on the type of business you own, your tax liabilities can differ quite a bit. For example, a C corporation has to pay a flat tax of 21%, while the percentage for a pass-through entity is determined by how much the owner is taxed. These are just two examples. There are many others, like sole proprietors, LLCs, and many more, all with different tax rates. So, how do you keep track of all these important tax details? Well, either you must be an accountant yourself or you must hire a tax professional to assist you. It’s that simple. An expert tax professional will be intimately familiar with the different tax liabilities and be able to prepare your company taxes according to the correct rates.
Staying Abreast of Tax Code Changes
In addition to understanding tax liabilities, a tax preparer also keeps up with any changes that the federal, state, or local government makes to the tax code. These codes are updated continuously, with new versions rolling out yearly. Any changes may affect the amounts that you pay to these entities quarterly or at the end of the fiscal year. If you are not constantly brushing up on your tax code, you could end up paying either too much or too little in taxes, leaving you open to penalties and levies. This is yet another reason to enlist the services of a tax professional.
What if you get Audited?
On top of all the other services provided by a tax professional, if your company is selected for an audit either by the state or the IRS, they will assist you in navigating the rough waters of the audit process as well. This is a huge advantage because your tax preparer has a thorough understanding of your business’ financials and full access to all your tax records. They understand the language of the IRS and therefor identify when the auditor is in the wrong. Auditors will often disallow all your deductions simply because it’s easier on them. This puts the burden of proof on you the taxpayer. If this happens to you, are you confident with your ability to challenge the IRS’s claim? If the answer to that question is not a firm yes, you should be using a professional to prepare your taxes.
Without the assistance of a professional tax accounting firm during this portion of the process, you would lose countless hours gathering the requested documentation and worrying about presenting your case to the agent. These lost hours are valuable time that you should be spending running your business, managing your employees, and developing new innovations to help your company thrive. A professional tax preparer can take some of the crucial paperwork off your plate, leaving you with time to handle your daily business operations. Additionally, your tax preparer has a much deeper understanding of both tax liability and tax code than you do, and with the ability to intently focus on your tax forms and financials, is less likely to make a mistake than you are.
Ready to Hire a Tax Professional?
If you know that you’re in over your head when it comes to your company’s taxes, or you acknowledge that you simply just don’t have the time that it takes to focus on getting these filings done properly, then you need to hire a tax professional. At Enterprise Consultants Group, we handle tax return preparation and have a solid and in depth understanding of tax law. Our expert team will work diligently to help keep all of your business’s tax documentation and payments in order, leaving you to do what you do best – run your business!
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