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Starting a few years ago I started using a professional certified public accountant to prepare and file my small business federal and state tax returns. I had been using tax preparation software but it became too complicated and time consuming. The idea that this type of software can be used effectively by anyone to accurately prepare their taxes is a stretch. Basically I wasn’t saving any money by trying to prepare my own tax returns because it was taking so much time away from operating my business. There is just so much information to organize and the rules change from year to year. Even small changes can cause a misunderstanding that can take hours upon hours to figure out. This just wasn’t working form me or my business. In addition to lost time, it was also costing me money because I wasn’t familiar with a lot of the deductions that I could legitimately be taking. This in and of itself requires reading books and keeping up to date on the voluminous rules related to what deductions are allowed and in what circumstances.

The other, really important reason to have a professional prepare your taxes is for liability reasons. Certified public accountants carry what is called errors and omissions insurance which covers them for liabilities that may arise in the case of a mistake that may have been made. Mistakes on tax returns or on the reporting of tax information can result in very harsh penalties and may not be worth the risk for someone who really doesn’t understand tax law. Also, it is a good habit to get into. If you are trying to expand your business, you will undoubtedly need the services of professionals such as accountants, attorneys, and lenders. Learn how to utilize these professionals to your benefit.

A good example of how my accountant is actually saving me money is in the write off that my business is entitled to for depreciating assets. The first year that the business taxes were professionally prepared our landscaping business had just purchased a new, expensive 3000 psi pressure washer that we use regularly for our commercial accounts. The best way to legitimately benefit from writing the expense of this asset is to depreciate it over time. Now I do not pretend to understand the nuts and bolts of depreciating physical assets but it is a method called straight line depreciation. This offered our business the greatest benefit in terms of applicable write off over the useful life of the asset. Now when we are considering leasing or financing new business equipment, similar to a commercial pressure washer we consult with the accountant to find out what type of tax benefits should be used in our decision making process. Basically, you are leaving money on the table by not taking advantage of every legal deduction that is available to your business.

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