Another thread brought up a question about tax preparation -- who and how much. So for anyone who cares to chime in, particularly business owners: do you pay someone to prepare your taxes, and if so roughly how much does it cost each year?
No. Have done it on my own since I was 18. Sorting out the form filing is the easy part. That is especially true today where EVERYTHING you need to know is available on line. The hard part for me is making myself take time away from everything else to assemble the information and get all of the numbers moved to the proper places.
As a business operator this is just one more thing that we either chose to do for ourselves or pay others to do for us. My logic is that I'm working primarily for the money so handling all money-related functions is mighty important. As I posted in another thread recently, doing it yourself helps you to pay much more close attention to those things that will impact the final amount of taxes owed. There are so many different opportunities to reduce the total tax owed that you really need to know what they are at all times. The old concept of dropping off a shoe box (or 10) full of receipts and such at someone's office in February or March then waiting for them to call with the results is not the way to maximize profits.
What can work quite well, though, is a combination of both. Having others doing the nasty part of crunching the basic numbers would be great, but staying focused year round on making decisions based on how that may impact the final tax amount is critical.
One example from almost thirty years ago. I was buying a piece of real estate that included a building that was a single-purpose building per the tax code. For several years there had been a tax credit available encouraging investment in such buildings. However, that credit opportunity was to end on December 31 and would not be available in the next year. The building represented about 50 percent of the value of the property and the credit was something like 20 percent. So roughly 10 percent of the purchase price was returned to me at tax time. We completed the deal and filed the deed on December 30. A delay of a few days would have cost me that 10 percent. Knowing that I would be eligible for the windfall encouraged me to maximize income in that year and postpone paying as many deductible expenses as possible into the following year. That way those expenses would help reduce the next year's net income.
I spent on average $1,511 per year on a CPA (to handle my taxes) from 2002-2006. Then I switched to TurboTax from 2006-2014. Now I use TaxAct.
Jim Frame, post: 352256, member: 10 wrote: Another thread brought up a question about tax preparation -- who and how much. So for anyone who cares to chime in, particularly business owners: do you pay someone to prepare your taxes, and if so roughly how much does it cost each year?
My accounting costs run between $2200-$2800 annually.
That is for two businesses though. I have a corporation that owns my office condo which in turn leases it to my Surveying corporation.
A little costly, however if I get audited itÛªs going to be the Accountants problem, not mine!
Another thing business owners need to keep in mind is what to do if you have a year that results in an incredibly negative net income. At some point as the income falls you hit the point where total tax owed is zero and you can get back any already paid in for that year. However, when there is more negative income left over, that can be shifted into other tax years to alter that year's tax return. It's been a long time so things have probably changed but it seems like you can carry it back three years, in this case the 2014,2013 and 2012 tax years, and/or you can carry it forward up to 25 years. The trick though is that you apply the negative amount, say to the 2014 year, where it would normally appear then go through the entire set of forms making adjustments where needed until you finally get the new number. As that will be lower than what your tax liability was at the time you will get a refund from the IRS. If the negative number is so large that you have an additional amount still available you take that amount to the next year prior and repeat the process again, resulting in another refund. You keep doing this until you run out of negative dollars. The year I did it I got all three years refunded in full and had a little left to move into the year tax year forward.
