Should You Hire an Accountant to Manage Your Books?
As a home business owner, you likely have a thorough understanding of the importance of saving money wherever possible. But you also know that there are certain areas where it’s unwise to scrimp.
Trying to determine whether or not it is in your best interests to hire an accountant to take care of your books is something all home business owners eventually have to face. Following are some things to consider when making this important decision.
1. Your Income Level
The IRS has certain characteristics it looks for when determining who to audit. They base this on a complicated algorithm that calculates numerous factors, including their chances for catching tax return errors that will lead to increased tax revenue for them. If your income meets or exceeds $200,000 a year, your chances for an audit are increased.
If an accountant prepares and signs your return, those chances are reduced, partly because the IRS knows that the accountant has reviewed your paperwork and has signed off on it as being truthful.
2. Your Time Management
Home business owners are often wearing all the hats in the business. You can’t expect your business to grow and reach its potential if you are spending much of your time balancing books, filing quarterly tax returns, paying monthly payroll tax, and keeping track of deductible time and business expenses. An outsourced bookkeeper can take care of many of these tasks for you, but they will be the first to tell you that they are not accountants.
The task of taking all your yearly receipts and documents and compiling them into a tax return for your business would eat up at least as much of your time as it would take to simply hire an accountant to take care of it for you.
As a business owner, you don’t have time to do every single task yourself.
3. Your Deductible Expenses
Can you be absolutely certain you are taking advantage of all the deductions for which you’re eligible? Tax laws change every year. Accountants are privy to tax law changes as soon as they occur, in all the states in which they do business. It’s unlikely that you will be able to guarantee you are taking all the deductions in the right amounts.
Wouldn’t it be nice to be able to call up your accountant anytime during the year and ask his/her advice about the advantages or disadvantages of making certain business purchases on a business credit card versus paying for it out of your business checking account before the end of the year? And wouldn’t it be nice to know that the deductions you are claiming are completely legitimate and have been overseen by a professional accountant?
In the event that you do get audited, your accountant will act as your official representative to the government official. While you may have an emotional or fearful response to an audit notification letter, your accountant will be able to objectively deal with the situation, for one reason because that’s their job and they’ve done it before in other instances.
If worse comes to worse, and you are called to appear before a court, your accountant will either appear as your proxy or will be able to speak for you and guide you during any interrogation. They will be able to explain everything that appears on your tax return and will be up to date on your rights as a business owner and citizen.
The scales of justice will be balanced in your favor when you hire an accountant.
Kate Supino is a professional freelance writer and small business owner who writes extensively about best business practices.
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