Every business owner (and remember, this means independent contractors, too) should have a good CPA. Even if you can handle your own bookkeeping, a tax professional can advise you on a number of important issues.
- Should you work as a sole proprietor or set up an LLC?
- Do you want to be taxed as an individual or a corporation?
- Should you file quarterly or annually?
- How much money should you put aside to cover your taxes?
- What business deductions are allowed and how should you categorize them on your P&L?
- What is a P&L and why do you need one?
- How can you set up a home office in a way that allows you to deduct a portion of your mortgage/rent, utilities, and other expenses?
- What else can you do to maximize your return?
Have you even thought to ask these questions? Or do you just do your work, wait for your 1099s to come, and stress out for a few months trying to figure out where all of your money went and how you’re supposed to pay the taxes you owe? There might be ways you can keep more of your money for yourself! I understand the appeal of the cheaper do-it-yourself tax programs, but those automated services don’t look out for you the same way a dedicated CPA does.
“But I can’t afford a CPA.”
The way I look at it, you can’t afford NOT to have one. Whether you’ve already started your business or not, you have to file a personal return, right? So you always have a need for a tax professional. It’s nice to have someone on your side, ESPECIALLY when you need some guidance. If you are prepared, the accountant shouldn’t cost you too much, and the savings they can find you often takes care of the fee. And even if not, they save you the time and energy of having to do it yourself, and that time is valuable, too. You could be spending it growing your business.
“I haven’t even made a sale yet, so how can I pay someone?”
Maybe you haven’t landed a paying gig yet, but have you spent money on your website, business cards, head shots, equipment, training/education, etc.? That’s all part of building your business and should be included in your tax return. The IRS understands that it takes money to start making money sometimes. You don’t have to earn a profit your first year, or even your second year, to qualify as a business.
“I wouldn’t even know how to find one.”
There are a number of ways to find a good CPA, but I always recommend getting a referral from someone you know. Ask your friends, clients, or other people in the industry who they use. Chances are they aren’t going to send you to someone who didn’t do a good job for them. You can always check reviews on Google, Yelp, Angie’s List, etc. if you want further verification.
This stuff isn’t fun. I get it. But that’s why having a good CPA is crucial. It’s THEIR job to know all of the rules here, not yours. And the rules change all the time, so why not just let the professionals do what they do so you can do what you do? Let me put it this way. I’m pretty educated in accounting. I do the bookkeeping for a number of companies, as well as my own. I file my own payroll taxes and the various quarterly and annual business reports that are required in my state, but I have a CPA who handles my business and personal tax returns every year. I wouldn’t even try to do it myself. It’s just too important NOT to have a professional working for me.
So please, take charge of your business and start by hiring a professional who can help guide you through the process. It will make your life so much easier and more prosperous!
Come back tomorrow for Tip #2!