Small Business Tax Software and Service Options

During tax season, the first question small business owners must answer is whether to file their own taxes with the help of a software tool or hire an accountant. This is a personal question that depends on the budget and accounting confidence of the person making the decision. Here is a look at the ways most small businesses handle their taxes, and the tools they use.

Do Your Own Books, But Hire An Accountant

A popular option for many business owners is to keep their own books, but turn to an accountant for tax time.

QuickBooks Online SignupQuickBooks Online is a popular bookkeeping product among small business owners, but some accountants say that it’s worth getting professional help to get you started on the right foot with QuickBooks. An early consultation will help ensure that transactions are properly categorized making tax time significantly easier.

“I would recommend a conversation with an accountant before starting any business,” says Janet Matteson, an Austin CPA. “It gives you a practical starting point for the record keeping part. QuickBooks is very user friendly, but that can be as dangerous as it is helpful. I encourage people to let an accountant do the initial set up of the QuickBooks file because that can be confusing and frustrating.

“We [accountants] do it all the time, but folks running a business would only do it once and that can make it difficult. I like to do the first couple of months of bookkeeping to establish a pattern and to understand how the business flows. Then a couple of how-to sessions to teach the client. This works really well. Record keeping is the responsibility of the business owner, and it is important that you have financials you can rely on especially come tax time!”

DIY With or Without Tax Software

If you’re a small business owner or sole proprietor, the expense of hiring an accountant may seem daunting. Many small businesses choose to handle their own taxes and bookkeeping, and there are plenty of tools to help streamline that process.

While some business owners say they prefer to fill out IRS forms by hand, many also use products like TurboTax to help prepare taxes.

“We use TurboTax because it’s so simple and doesn’t cost much more than about $100,” says Mallory Brooks, who runs her own small business in Austin. “Spectrum is a super small company, but there are still a lot of minor expenses/details to include.”

Kate Thomas, a fencing club owner in Pennsylvania, says she used to do her taxes by hand before owning a business. “I switched to TurboTax because that service made doing business taxes much easier, and fit well with QuickBooks.”

TurboTax is one of several online or software accounting products that make doing your own small business taxes relatively easy and streamlined; other popular products include TaxAct, H&R Block, and Jackson Hewitt.

H&R Block’s online filing include a premium product for $42.49 that is geared toward self-employment income. TaxAct has a similar product that describes its target audience as self-employed, contractors, or freelancers, and runs for $21.99. TurboTax is one of the more versatile products, but also pricier. Its Home & Business edition is $79.99, and covers self-employment and small business income, as well as freelance and independent contractor income.

Hire Pros to Cover it All

A third option is to put bookkeeping and accounting into the hands of professionals. That may be two separate professionals, or one person – bookkeeping and accounting can be somewhat interchangeable.

Determining which professional you need depends on the industry and the complexity of the accounting and bookkeeping.

“What industry is the company is in? Do they maintain a number of fixed assets or a large amount of inventory? How many employees do they have? The more complex the organization, the more important it is to make sure that the company’s bookkeeper is also supported by a good CPA who can provide advice as and if needed. It’s a great partnership that keeps communication open and data strong,” said Katie Bunschoten, founder and owner of the bookkeeping and consulting firm KHBOffice, in an Intuit blog post about the difference between bookkeepers and accountants.