Hiring a CPA to take care of any of your tax preparation can seem quite a leap of faith, especially if you are like most small business owners who are perennially looking for ways to cut costs. While the do-it-yourself approach may certainly leave more money in your bank account for the short term, the truth is if you are not a professional at preparing taxes, you increase your chances of being audited by the IRS. And if you’re not careful, this can mean losing even more money through penalties in the future–much more than what you would have paid a CPA. Here’s how a CPA can help keep you run your business better.
Accuracy with Your Tax Returns
If you running your own business and doing all the bookkeeping and payroll yourself, there is a good chance that some things are falling through the cracks. Whether it is a mathematical error from improperly balancing the books, or even a failing to file a necessary form, you can easily trigger an IRS audit by failing to file an accurate tax return. Remember that the goal is to minimize interaction with the IRS as much as possible, and one way to do that is to hire a professional to do the work.
Familiarity with the Red Flags
Why are some returns intensely scrutinized, and why are some ignored? While there are many old wives tales on what triggers an audit with an IRS such as having a home office, for example, a CPA should be able to successfully navigate you through it with proper documentation. For instance, did you know that having excessive entertainment and travel expenses, even when coupled with high income, can make the IRS do a double take on your form? Your CPA make sure that the expenses that you plan on claiming meets the “business purpose” tests.
Give You Professional Advice
While you may know your business inside and out, expecting to have the same breadth of knowledge when it comes to accounting or taxes as a CPA is close to impossible. When you work with one, you may even find yourself surprised with all the additional items that you can claim as an expense based on their advice. In fact, some small business owners may find that hiring a CPA has made them more money instead.
An IRS audit can be terrifying for someone who has been doing their taxes on their own. Now that you know what a CPA can do for you to avoid triggering an IRS audit, it’s time to focus on your business and let the experts take care of the rest.
Ten Ways to Audit Proof Your Tax Return, Forbes.com
Shhh, Home Office and Other IRS Audit Trigger Secrets, Forbes.com