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What’s Next For Your Micro-Business
Tax Compliance A Big Burden For Small Businesses
Chances are you just wrapped up another tax season for your small business. And chances are, it was a big hassle that took valuable hours out of your work day.
In March, The Discover Small Business Watch, a monthly index of U.S. small-business owners who employ less than five employees, found that tax preparation takes a toll on small-business owners.
About 77 percent of respondents to the Watch survey said that tax preparation and documentation are time consuming. And 74 percent said the complexity of the tax code distracts them from focusing on the needs of their businesses.
“Nearly three out of four small-business owners feel that the complexity of tax code is a distraction. Nearly two out of five business owners struggle with finding and organizing tax documentation,” says Sastry Rachakonda, director of Discover’s small business credit card. “Tax preparation and filing certainly places a burden on small-business owners in America.”
To ease that burden, many small-business owners turn to tax professionals. The survey found that 73 percent of business owners hire an accountant to do their taxes.
But the No. 1 reason given for hiring an accountant might surprise you: Small-business owners said that the biggest advantage of hiring tax professionals is having them handle paperwork. Finding more deductions finished a close second.
What You Can Do
If you’re in the market for a trusty tax professional, you have several good options, each with different specialties and credentials.
A certified public accountant (CPA) is licensed by individual states and has passed a CPA exam. An enrolled agent (EA) specializes in tax issues and is licensed by the federal government. Tax attorneys specialize in tax law and are certified by the state in which they practice.
Most small-business owners choose either a CPA or an enrolled agent to handle their general business tax matters. Tax attorneys usually come to the rescue when you encounter more complex and complicated tax issues.
No matter which flavor of tax pro you choose, make sure she or he can represent you in an IRS audit. If not, go elsewhere.
CCH, a leading provider of business, legal and tax information, recommends choosing a tax advisor whose professional approach closely matches your own. If you generally make conservative business decisions, don’t go with a tax pro who takes an aggressive approach to minimizing your taxes. On the other hand, you want a tax advisor who will generate ideas about ways you can reduce your taxes.
For more tips about choosing the right tax advisor for your business, check out the free online Success Skills Seminar Find The Right Advisor available from the National Association for the Self-Employed (NASE).
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(Posted April 2007) |
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