Tax Preparation for Small Businesses: A Comprehensive Guide for Accountants

do i need a cpa for my small business

Costs will vary widely depending on where you are located, what states you do business in and whether you choose an accountant or an accounting firm. As a general rule, you will either pay a fee per service, or an hourly rate. Small business accounting mirrors this definition, but usually pays special attention to even the smallest details, since for most small businesses, every dollar counts and needs to be noted. Tracking the money that flows in and out of your small business is an essential piece to ensuring that you not only stay afloat, but also continue to grow successfully. We believe everyone should be able to make financial decisions with confidence.

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You can also ask that the CPA review and sign off on your tax return that may have been prepared by an accountant working under the CPAs direction. An accountant is a professional who engages in accounting, by preparing and auditing financial statements, bookkeeping, and financial analysis. An accountant may also qualify to give tax advice and prepare tax returns. If you’re looking for a business tax advisor, you’ll want to find a professional that falls into one of these three categories.

Can I Do My Small Business Accounting Myself?

Know your audience — small business owners concerned about their tax situation — and arrange your messaging accordingly. After all, it’s about their financial health and they deserve to have a say in the forms you use. This can also help you create customized tax solutions for each of your client’s businesses, which might save them money in the long run. The deadline for a specific business will often depend on its structure — S corporations must file by March 15, for instance, but that’s not true for everybody. Your checklist should include all this information for each structure type to avoid unnecessary late filing penalties for your clients.

  • Without carefully reviewing the data, you could end up forgoing a more advantageous tax filing status.
  • Depending on the size of your business and how confident you feel with accounting, it’s possible to run a business without an accountant.
  • Let’s take a look at an especially useful part of a financial report—cash-flow analysis—for an example of how financial data improves decision-making.

Jason holds a BBA from Simon Fraser University and is a designated CPA. Jason’s firm, Notion CPA, is an accounting firm with a business-first focus. The firm specializes in preparing personal and corporate taxation while providing fractional CFO work and leading the accounting and finance function for several small-to-medium-sized businesses. In his free time, you’ll find Jason on the basketball court, travelling, and spending quality time with family.

Claim Eligible Small Business Tax Deductions

For business owners who don’t mind doing the data entry, accounting software helps to simplify the process. You no longer need to worry about entering the double-entry data into two accounts. payroll fraud Your small business is booming, sales are strong and you’re on track for a record year. If you’re asking yourself these questions, it’s time to start working with a professional.

  • In short, once a business is up and running, spending extra time and money on maintaining proper records is critical.
  • Reputable small business accountants and accounting firms should have no problem setting up an exploratory meeting to go over your needs, as well as provide several references.
  • A good place to start is with your business accountant or bookkeeper.

The more precisely you understand your firm’s accounting, record-keeping and tax-filing challenges, the better you will be able to tell whether you need all that a CPA brings to the task. When searching, you’ll want to make sure the person you find is actually a Certified Public Accountant. That means they’ve passed the test and are licensed by your state. In addition to taking the test, CPAs fulfill continuing education requirements to keep their licenses active and stay up to date on all federal, state and local tax laws. If they’re going to prepare your taxes, make sure they have a Preparer Tax Identification Number (PTIN).

Best Small Business Accounting Software

Social media, on the other hand, can drive business in a longer and more indirect fashion. For the most part, a simple online presence is relatively easy to start with minimal start-up costs. And while an online presence won’t guarantee an increase in exposure, not having one can have a negative impact and can discredit you to a potential client.

To verify the income amount on your profit and loss statement, you need to provide your accountant with income records. This includes bank statements, deposit slips, and sales invoices. This is not something that the business owner pays out of pocket. Instead, this tax is added to the cost of the good or service and passed down to the consumer. The CPA is required to make inquiries, perform physical inspections, confirm balances, and perform other tests to ensure the financial statements are free from material misstatements. Compilations, reviews, and audits lend credibility to a company’s financial statements.

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By doing your due diligence, you will have the best chance of hiring a highly qualified CPA. It’s important to have an idea of the kind of services you need before you meet with a prospective CPA. This way, you can have a clear discussion on how they are going to bill you. Because of this certification, a CPA has a fiduciary responsibility to their clients, while an accountant does not.

do i need a cpa for my small business

The Association of International Certified Public Accountants (AICPA) website has a CPA directory and the National Association of Enrolled Agents can help you find an EA. Local bar associations can assist you in finding tax attorneys in your area also. The best accounting software depends on your specific needs and the type of services you provide. For startups, self-employed, freelancers and micro-businesses, we recommend Kashoo, Neat, Intuit QuickBooks and Sage Business Cloud Accounting, respectively.

The tax forms needed to file your small business taxes vary based on the legal structure of your business. Some common forms include Form 1040, Schedule C, and Schedule E. Consult with an accountant or tax professional to find out which tax forms your business requires. Mixing personal and business expenses can cause confusion when it comes to filing your small business tax return — and errors can be costly. Make sure that you’re keeping your personal and business expenses separate and easy to sort by opening a small business bank account. While it may seem like an extra expense, hiring an accountant offers numerous benefits to your business. While newbie business owners can get by for a while, making enough money to live, what is often a shock is the amount of taxes owed on the income they generate.

While you do not have to be a CPA to prepare or file taxes, the training and expertise it requires to gain that credential matters. Simply put, you’re a CPA, and you deserve a premium for your services. Starting an accounting firm is no different from starting any other small business. And while there are accounting-specific requirements, it’s important to remember that you’re starting a business first. The CPA exam is a rigorous process over several days, including many facets of financial and tax expertise. After they are licensed, CPAs also must comply with continuing education requirements in order to maintain their licenses.