A few years ago, a business partner and I started a limited liability corporation (LLC) as a part-time business. Up until this year, we have taken a loss, as we were just growing our business. The first year, we had a tax firm do the business taxes. We have done it on our own ever since, but this year we are considering having it done again. Should we use a Certified Public Accountant (CPA)? Or are the business tax software programs worth using?
FPA member Constance Stone, CFP®, of Stepping Stone Financial, suggested that a professional tax preparer (CPA, Enrolled Agent or Accredited Tax Preparer) can provide you and your partner valuable advice in tandem with preparing your income tax returns. “I believe it’s worth paying to have a professional review your income and deductions as well as prepare the return,” Stone said. “I often see mistakes on taxpayer-prepared and even some professionally prepared returns. I don’t think you’d want to miss an opportunity to optimize your tax savings by going it alone.”
Other planners had a slightly different perspective. FPA member Karin Maloney Stifler, CFP®, of True Wealth Advisors, said the following: “This is a personal preference question that depends on whether you have the time, talent, interest and tools to competently handle your own tax preparation.”
“The value of a qualified tax preparer is possibly a higher level of expertise, more up to date knowledge of tax law — which constantly changes — time savings and an "insurance policy" of sorts in the event you need advice or guidance,” Maloney Stifler said. “If you expect to grow your business, an investment in a relationship with a tax expert may pay off even more down the road. When you consider the cost-benefit tradeoff of doing it yourself versus hiring it out, do consider the long-term impact.”
FPA member Dan Bussone, CFP®, of Dean Financial Advisory said the following: “If you are a person who is comfortable with doing your own taxes, even with the added complexities of a small business or limited liability corporation, then the tax software available today will work fine for you. However, it’s important for you to understand that these programs are only as good as the info you put into them. ‘Garbage in, garbage out.’”
“Since you haven’t been to an accountant since you started the business, I would strongly suggest you visit one again and have them do your taxes this year,” Bussone said. “To prepare, you should give some thought as to questions you have regarding what is permissible to deduct and what is not, as well as all aspects of running the business. The better understanding you have of how your business is taxed as a LLC today and in the future will help you determine if a different business structure may eventually be more appropriate.”