Should you hire a CPA? When to get tax help

Shiloh Johnson
By Shiloh Johnson

The life of an entrepreneur is a juggling act. When it’s time to crunch the numbers and file your business taxes, combining the power of technology with a person-focused CPA can save you a lot of time and stress.

It’s no secret entrepreneurs wear many hats, especially when you’re busy getting a new business off the ground. Still, the balancing act that goes toward turning your entrepreneurial dreams into a reality can sometimes feel like a one-man (or woman) circus show. When you’re not scrambling to spread the word about your business, taking care of your customers, or handling the day-to-day operations, the hours can stretch even longer when it’s time to sit down and crunch the numbers. 

But trying to juggle your business finances and tax responsibilities on your own often leads to confusion or stress. More than 60% of small business owners don’t feel they’re knowledgeable about finance and accounting, yet many continue to manage their books in-house — including by recording their P&Ls on paper

That may work for a little while, but as your business grows, so do your tax responsibilities. Whether you’re navigating business tax through tax & accounting software or outsourcing your bookkeeping needs to a contractor, there may be times when you need to lean on the expertise of a Certified Public Accountant (CPA).  

As many small business owners look for ways to reduce the time spent on accounting and tax filing duties, combining business tax software with a person-focused CPA can help. A CPA can provide real-world strategies to save you time and money, reduce your stress, and give you confidence that your taxes will be filed accurately and on time. 

Here are four reasons it might be worth hiring a CPA.

Reason #1: You have a small business, side-hustle, or rental property 

Whether you’re just starting your business or preparing for another tax season, a CPA can provide additional insight into the best structure for your business, the accounting system or software you’ll use, and the strategies you can implement to minimize your tax liability. When you own your own business, you may also qualify for many different tax write-offs, and a professional will have the expertise and experience to help you navigate the tax code and maximize your deductions.

If you’re the owner of multiple properties, returns on a real estate investment can quickly become complicated, and a CPA can help you be sure that you’re not missing any savings or additional deductions. Business taxes are different from personal taxes. Once you’ve hired employees or have begun selling products in multiple states, hiring a CPA can help you manage the other aspects of your business accounting to save you time and headaches.

Ultimately, there are several ways a CPA can help you with your business:

  • Establishing the best structure for your business: A CPA can recommend the best business structure for your company. The legal structure you use, such as a sole proprietorship, partnership, LLC, or corporation, can affect your tax liability and reporting requirements.
  • Helping to set up your day-to-day accounting process: Deciding between cash or accrual accounting will affect your accounting software. Simpler cash accounting is popular among new businesses, but the IRS requires accrual accounting. A CPA can help navigate these distinctions.
  • Making sure your business complies with tax laws: It may seem obvious, but an essential function of a CPA is to help ensure that your business complies with current tax codes, including any changes that have occurred. 
  • Identifying appropriate deductions: A CPA can help you determine which deductions you might qualify for. While taking as many deductions as you’re entitled to will save you money, making questionable deductions that could trigger an IRS audit. A CPA will help you decide which deductions you should and shouldn’t take. 

| Combining business tax software with a person-focused CPA can spare you stress, giving you the confidence that your taxes will be filed accurately — and on time.

Reason #2: You want to establish year-round accounting practices that will make tax time easier

Because a CPA knows how to budget and financially plan for the success of a small business, they are excellent advisors to help you determine what kinds of services, products, or software best suit your business. Frequently, a CPA will recommend a variety of small business accounting options:

  • Accounting software: Many in the finance industry agree that small businesses and entrepreneurs benefit from accounting software that helps to track both the money coming in and the money going out of your business. This can give business owners and anyone else who helps with the bookkeeping a clear view of their profitability and help them prepare for tax season.
  • Budgeting & forecasting software: Similar to accounting software, budgeting, and forecasting software can help business owners plan the financial resources they may need to support their business activities in the future. Software like this can help businesses and entrepreneurs anticipate future finances, which can help to inform present-day decisions.
  • Business attorneys: In certain circumstances, a CPA may recommend the services of an attorney who can help your business navigate particular situations that may be affected by business law, estate planning, or tax law.  

Reason #3: You’re looking to gain a competitive edge and encourage business growth

Accurate financial statements and tax returns can help you understand the health and trajectory of your business. Hiring a CPA can even benefit you beyond just your accounting and tax preparation. By helping you gain a detailed view of your finances, you can make more informed decisions about the future of your business. These practices can help you evaluate your performance and create a growth plan compared to your competition.

  • Test growth options: With an established budget and a means of evaluating financial trends, you can set achievable goals for different milestones of your business. Then you can set up automated reporting that will help you compare your progress with previous quarters or years.
  • Help determine KPIs: A CPA can help you determine which key performance indicators (KPIs) would be most valuable for your business. For some small business owners, one KPI may be revenue. They may also focus on how much inventory they’ve sold or customer loyalty.  Direct costs may be a vital KPI in manufacturing, while billable hours vs. revenue may be a more relevant key point indicator in a service-oriented company.
  • Understand the value of your business: Even if you aren’t ready to retire or sell your business, knowing its value can help you prepare for opportunities or unexpected life events. Having the appropriate valuation will help you begin business succession planning and identify people who may eventually take over key aspects of your business.

A CPA can benefit you and your business far beyond simple bookkeeping. As a trusted advisor, your CPA can help guide you on budgeting, forecasting, cash flow management, and analysis to then make decisions that will help your business become more competitive in the industry, more fiscally healthy, and more prepared for profitable business growth. 

Reason #4: You’re preparing for major change, like an acquisition, merger, relocation, or other special circumstance

If your business is facing significant change — such as a move, merger, purchase of large equipment, rent for office space, or closure — consulting with a CPA can help you navigate how events like these might affect your business taxes. Significant structural or operational changes in your organization, such as changing the legal structure of your business or opening a physical location for your previously home-based business, often require detailed analysis of financial records, verifications of assets, and other due diligence. 

Other special circumstances in which a CPA can support change in your business can include receiving a letter from the IRS, such as a notification of an audit or a request for additional information to support your return. Hiring a CPA to represent you can help you respond appropriately when dealing with the IRS by helping you respond with the needed information and resolve the issue as seamlessly as possible. A few other changes to your business where you might want the help of a CPA include the following: 

  • Applying for a small business loan: If you think your business needs a small business loan, a CPA can help you decide if the financing will fit your long-term goals. A CPA can also provide recommendations for the best type of loan, the size of the loan, and the best terms to limit the impact on your overall cash flow. You can even get assistance in preparing financial statements for your application.
  • Experiencing a personal crisis that impacts your ability to work: Sometimes, factors of life outside of work can affect your business. A CPA can help you determine if the event has tax implications, help you calculate the value of your business, or prepare financial statements.
  • Implementing startup or structural changes: If you’re just starting your business or restructuring your current business, a CPA can help you manage the legal structure of your business. This can help you limit expenses and manage factors like insurance and banking. You can also benefit from a CPA’s assistance in advising the best way to manage your bookkeeping, preparing financial statements, and setting up payroll and day-to-day accounting systems.

If it’s in the budget, a CPA on your staff can handle all your business's financial and accounting aspects. This will free up your time to concentrate on servicing your clients, manage your supplies and inventory, and identify other areas of your business to grow your revenue.  

While taxes are essential, a CPA can do much more than calculations and paperwork to prepare your tax return. Their insight and expertise can help you develop strategies that can benefit your business well into the future. By keeping an eye on the economy and financial sector trends, your CPA can help you stay up to date with current tax laws and regulations. A CPA can function as a financial partner to give you the time and space to build your business up to its full potential. 

Shiloh Johnson
By Shiloh Johnson
Shiloh Johnson is a long-time CPA and founder of ComplYant, a technology platform offering business owners and entrepreneurs a simple way to manage tax rules and requirements.

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