No matter how small your company is, you have to file taxes. But, your small business tax preparation cost can be more expensive than you might think. A study by the National Small Business Association (NSBA) said 42% of small businesses struggle with financial burdens from the federal tax code. How much does small business tax preparation cost?
There isn’t a simple answer to how much tax preparation will cost you. Several factors affect the cost of doing federal taxes. Here are some costs of tax preparation for small businesses.
The NSBA said administrative expenses were the biggest federal tax challenge for 59% of small businesses. One common administrative cost is accounting services.
Your recordkeeping and tax preparation methods determine how expensive your administrative costs are. You might choose to outsource all your tax preparation tasks. Or, you could do some of the preparation to lessen the expenses. Two options for taking care of administrative tasks include using accounting software and hiring an accountant.
Use accounting software
You can use accounting software to record your business transactions. The software automatically computes totals for you, which you will need to fill out tax forms. Cash-based accounting software solutions also help you quickly find the figures you need to file taxes.
Because there are many programs available, small business accounting software expenses may vary. For a more cost-effective option, get online accounting software with a low, monthly subscription.
Hire an accountant
You might have an accountant handle all your tax preparation. Some business owners hire a full-time accountant. Many businesses outsource tax preparation for their income tax returns. Accountant service fees can range from roughly $175 to $820 for business income tax preparation.
The more organized your financial records are, the less time it takes to file your taxes. Many accountants charge you per hour. If your accountant spends less time organizing your records, your bill could be lower.
If you handle your taxes, reducing tax filing time helps get you back to operating your business. The NSBA says one in three small businesses spend over 80 hours per year preparing for taxes. In other words, small business tax preparation costs you 10 eight-hour work days.
Federal taxes impact small businesses’ day-to-day operations. In the NSBA study, over half of small businesses said tax credits or deductions affect company decisions significantly (27%) or moderately (32%).
That means small companies base some spending decisions off tax liabilities. Here’s an example of how credits and deductions affect business decisions:
Let’s say you have 25 full-time employees. You also meet the Health Care Tax Credit requirements. You want to hire more workers, but you would then have more than 25 employees. With more than 25 full-time employees, you are ineligible for the tax credit.
Your small business tax preparation cost
Many aspects affect how much tax preparation costs you. You might want to review your tax preparation methods to decide if they are working for you. If you are unsure about tax preparation options, consider speaking with an accountant.
Do you need a way to make tax preparation easier? Our online accounting software is simple to use and helps keep your financial records on track. Try it for free today.