The second in my series of commonly-asked business tax questions. This question is really about the best way to prepare business taxes.
First, using tax software. If you have a simple business filing business taxes on Schedule C, and you provide a service, you might be able to use one of the major tax software programs that are available for desktop or online use. Shelley Elmblad, Guide to Financial Software, has some tips for selecting a tax software program. Look for the software version that includes Schedule C. You will also need to prepare Schedule SE (for self-employment taxes); most tax software programs have this schedule.
Some of the major tax software companies have business versions for preparing corporate or partnership returns. But these are very complicated returns. You must prepare a return for the business then separate out income for each shareholder or partner and report that on a Schedule K-1. Corporate and partnership returns, even the most simple, are not for amateur tax preparers.
Second, using a tax preparer. Like tax software, those tax preparation services are just not set up to prepare business taxes. Yes, they can help with a simple Schedule C, but, for the most part, they don't have the expertise to prepare a corporate or partnership return.
My business is a simple single-member LLC filing on Schedule C, and I still take my business tax return to my CPA to prepare, for three reasons:
1. I don't want to miss something that might save me some money. When I take in my return, we go through a checklist and my CPA knows what to ask.
2. I don't want to miss something that might cause me to have a fine or penalty or increase my audit risk.
3. If I am audited, I want my CPA to know what's going on so she can help me prepare for the audit and represent me.
Yes, you can do your business taxes yourself. The final reason not to prepare your business tax return yourself is that your time as a business owner is valuable and the learning curve is steep, so why not rely on an expert?
More on the Most Common Business Tax Questions