Taxes: Do-It-Yourself or CPA?

That’s the very question your clients ask themselves. There are free templates online, and YouTube videos for just about everything. So, they ask themselves, why hire you? The same thing goes for taxes. The Internal Revenue Service (IRS) offers free publications to assist with filing taxes. You can buy tax software at an office supply store or use a web-based application at a much cheaper price than hiring a certified public accountant (CPA). The decision to hire a CPA depends on your budget, the issues that surround your taxes and how much you earn.

Your Budget

CPAs charge a flat fee or an hourly rate to prepare and file your taxes. The fee is determined by the number of forms they have to prepare on your behalf, the number of records they have to sort through, such as bank statements, receipts and invoices, and the deductions you’re seeking. For example, if you’re a freelancer who needs to file Form 1040 and report 1099 income, then you’re going to pay less for services than a web design company with part-time employees and business partners. Either way, the starting flat fee is over $100 and hourly rates start at $80 per hour. Tax preparation software costs less. You can purchase desktop software or utilize web based software to handle your freelance or business related filings for as low as $20.

Tax Issues

Each creative professional has unique tax issues that they bring to the table. This includes:

• Level of business activity
• Deductions that apply to your creative business
• Past taxes owed

The more complicated your tax issues, the more you can expect to pay for CPA services or tax preparation software. Some software applications are limited and you may not be able to use them if your tax issues are complex. You may not want to rely on software if your assets are substantial or if you have outstanding tax debt. The fees you pay for a CPA in those instances will spare you legal headaches down the road.

Your Earnings

Protecting your assets and keeping more of the money you earn is the key to running a small business. You could experience more success as a business owner if you focus on your net profits more than your gross income. That means being strategic about taxes, and the strategies change when you earn more money. The reason is that you may have access to different deductions which will reduce your tax liability. If you don’t take advantage of the deductions available to you, then you could pay more taxes that you need to. Worst case scenario, you could end up owing taxes. Hiring a CPA might be a better option to save you money, and keep you out of trouble with the IRS. If you try to do-it-yourself using a software application and at the end of the process it shows that you owe taxes, then you should at least consider the option of hiring a CPA to evaluate your situation.

Whatever your decision, don’t wait until the last minute to take care of your taxes. Rushing your decision can lead to costly mistakes. Tax filing deadlines are the same every year. Be proactive and schedule a deadline, such as in January, to prepare and file your taxes.