Why, as a business owner, doing taxes yourself might not make sense.
As a business owner, you’re probably used to wearing a lot of hats. That kind of “get it done” attitude makes for successful entrepreneurs (and successful businesses). But there’s one major area of your business that requires a very specialized hat—and that’s doing taxes yourself.
While you certainly can do your taxes yourself, as a business owner, that doesn’t necessarily mean you should. Let’s take a look at some of the key reasons why doing taxes yourself might not be the best thing for you and your business:
1. Numbers Just Aren’t Your Thing …
Let’s be real: Not everyone is a numbers person. And if you’re not a numbers person? Doing taxes yourself probably isn’t a good idea.
Obviously, taxes are a numbers game. There’s a lot of complexity involved, and if numbers aren’t your thing, the monotony of all the math can feel overwhelming. Worse still, it can increase the likelihood that you’ll make a mistake, which can have serious consequences (more on that later).
Tax accountants don’t choose to go into their profession unless numbers are most definitely their thing—so if you’re not a numbers person, it’s probably best to leave all the tax math and numbers to the professionals.
2. … Or Numbers Are Your Thing, but You Don’t Have the Bandwidth for Taxes
Even if numbers are your thing, it doesn’t necessarily mean that doing taxes yourself is the right move.
Doing your business taxes is a time-consuming affair. And all that time you’re spending on your taxes? That’s time you’re not spending on your business, billing clients or bringing in revenue.
Hiring a tax professional frees up your time and energy to work on your business while they work on your taxes. So if you don’t have the time to do your taxes (and do them right!), you should definitely consider partnering with an accountant come tax time.
3. Business Taxes Are More Complex than Personal Taxes
If your personal finances are fairly straightforward, then filing your personal taxes can be pretty simple, which is why so many people choose to DIY them.
But business taxes? They’re another beast entirely. Depending on your business structure, you may need to consider payroll taxes, profit-and-loss (a.k.a. P&L) statements, issuing 1099s to contractors … the list goes on.
Essentially even the most straightforward business taxes are going to be significantly more complex than personal taxes. And the more complex the tax process, the more opportunities for error, which could trigger an audit.
Tax professionals have significant experience (sometimes decades!) navigating each step of the complex process that is business taxes (which means you don’t have to spend the time and energy figuring out how to navigate it yourself).
4. Tax Laws Are Always Changing
Tax laws are always changing and evolving—and unless you’re a tax accountant, you’re probably not going to know about all of those changes when it comes time to file.
This “not knowing” can increase the chance that you’ll make a mistake on your return—which, again, can cause major issues with the IRS. But it goes further than that. It can also cause you to miss out on deductions and credits you may be eligible for, which can cause major issues with your bank account.
For example, the 2018 Tax Cuts and Jobs Act in the U.S. introduced the Section 199A deduction, which allows eligible small business owners to deduct 20% of their pass-through income from their taxes. And if you were doing taxes yourself and didn’t know about this deduction? You’d miss out on knocking a hefty chunk off your income tax.
It’s a tax professional’s job to keep their finger on the pulse of what’s happening in the tax world, including any new laws, credits or deductions. And when you work with them, you’ll know that your taxes are being done in accordance to the most up-to-date tax laws (and that you’re pocketing as much of your money as possible).
5. Making Mistakes on Your Taxes Is Costly
The IRS is not a mistake-friendly branch of the government. When you submit your taxes, they expect them to be completely accurate, and if they’re not, it can cost you a lot of time, hassle, energy and cash.
Filing inaccurate, incomplete or late business taxes can result in:
- Hefty fines
- Additional penalties
- An audit, which is a huge time investment (and an even bigger hassle)
Basically, tax mistakes are costly from every angle—from a time perspective, from an energetic perspective and from a financial perspective.
A tax professional knows the ins and outs of filing business taxes; it’s literally their job. And while they’re certainly not immune to making mistakes (they’re human, after all!), the chance of a tax specialist making a mistake on your taxes is significantly lower than if you went the DIY route.
6. The Internet Can Be an Unreliable Place
If you do your business taxes yourself, you’re going to have questions, like:
- Which forms do I need to file?
- What are my tax rates?
- When are the deadlines for business filing?
And when you need those questions answered, chances are, you’re going to head to the internet.
But the internet can be an unreliable place. There is so much information out there, and it can be hard to sift through out-of-date or inaccurate info to find the answers you need.
Working with a tax professional will ensure you get all of your tax questions answered by someone who actually knows what they’re talking about (no offence, internet!) Plus, you won’t have to waste hours (or days!) desperately googling to find those answers.
Doing Taxes Yourself Is Your Call—but Come Tax Time, Consider What’s Right for Your Business
Bottom line? If you feel strongly that you want to manage and file your own business taxes, you can certainly go that route.
But keep in mind that doing taxes yourself is a big job in your business, and if you’re going to do them, you need to dedicate the time, energy and resources into getting them done right. If not, it’s definitely in your (and your business’) best interest to partner with a tax professional.
This post was updated in October 2019.