With taxes on the mind for many small businesses and other productive procrastinating perfectionists, I'm happy to share this guest post from Kathy Rappaport...
It’s almost April 17th! Whenever the tax due dates fall on a weekend or holiday we get extra time to procrastinate on filing our taxes; so this year we get two extra days. When you need more than the two extra days, you do have the option of filing an extension. That would make your due date October 15th and once you file it’s called an Automatic Extension TO FILE. Sadly, that doesn’t mean you get more time to pay.
NEED MORE TIME?
You would file Form 4868 but you must include how much tax you have paid and how much you estimate you will owe. And you might need help from an accountant or tax preparer to figure that out. As a business owner, it’s recommended that you actually have an accountant review your profit and loss quarterly to coincide with your quarterly estimated payments so you have no penalty and won’t owe when it comes time to file your actual return. Doing this actually eliminates that “heart attack” when you hear the actual amount of tax. If you do have a review before the year end, you can actually plan ways to reduce your tax obligation by opening a retirement account, spending money on tax deductible expenses and grouping deductions into one year to maximize deductions. Often, you can save whatever amount you might pay for the service to have it figured for you.
And this assumes that you are filing as an Individual. You may have a small business return that you file with your personal tax return called a Sole Proprietorship and you file a Schedule C for your business return.
NEED AN ACCOUNTANT?
To choose an accountant that is right for your business you should have an idea of the different designations of people who can prepare your tax return and why they are qualified:
1. Certified Public Accountant (CPA): This is the most educated person regarding business and tax; they’ve gone to school for a Bachelor’s Degree, taken a multipart test and done a two year internship in various types of accounting. Most have a specialty like working with Closely Held Businesses or Entrepreneurs or Corporate Tax Work or Audits or Financial Planning. Highest Caliber of Tax Knowledge and business knowledge. Licenses by state and can represent you in front of the IRS for tax matters.
2. Enrolled Agent: This person has studied tax and accounting and passed a test administered by the IRS which allows them to represent you at an audit. No degree or formal course of study required.
3. Enrolled Return Preparer: This person may have just worked down the street for that national chain that is well known for filling in the blanks. In some states they must complete annual testing and limited studies in Tax Preparation to know what to fill in. They may not represent you in front of the IRS or actually give you advice on what to do with your taxes.
How do you choose the right tax preparation for you?
First ask people in the same line of work you are in if they are happy with the person they use; You need a professional who can guide you in important choices for your business like whether to incorporate or become an LLC or S-Corp you would want a CPA who can recommend what is right for YOU; one size doesn’t fit all. Interview them. There are many options to select from and what is right for your friend is not right for you. Education is important but you should also be comfortable with the person you choose. They should never “pat you on the head” and tell you not to worry about it any more; you should be educated and informed so you know what is going on. After all – it’s you who is ultimately responsible if they make an error in your filings. Do you have bookkeeping issues you might want help with? Then you may want someone knowledgeable in QuickBooks or other accounting software who can help you. If their office is messy, will they lose your paperwork? Do they pay attention to you as a client? Are they listening to your concerns? All of these questions are just as important as the one question everyone wants answered – How much do you charge and how much will I owe?
Kathy Rappaport is a full time photographer with a studio in Woodland Hills California. Her first career was banking for 17 years when she opened a Bookkeeping and Tax Business which she now consults exclusively with Photographers. She is married to Frank – a CPA with a tax practice specializing in small businesses and entrepreneurs. Both Kathy and Frank are Certified QuickBooks Advisors.