Tax Preparation Software
From Informed Banking Wiki
January 15, 2006
In the process of building a BIG company, you may start out as a small company. Small company financials are better when they are well organized and up-to-date. That can make your tax preparations easier and less expensive.
Basically, there are five choices when it comes to corporate taxes for small businesses:
- Do not do them
- File an extension
- Use IRS forms manually
- Use business tax preparation software
- Hire an accountant
I highly recommend NOT taking choice number one. You'll be breaking the law and that's never a good idea. You could file an extension if your finances are totally disorganized and somehow tax season slipped right by without you noticing. I've done it before with little consequence, if any. Now I figure its better to get them done sooner than later.
Using the IRS forms directly is a possibility. I've never done this so I can't be too sure of how difficult it would be. My guess is that if you aren't too worried about maximizing your deductables, then this option may be realistic.
There are many software packages out there to assist in preparing your corporate taxes, such as Turbotax for Business, and H&R Block TaxCut. Currently, I am researching these two packages as options to do my own Subchapter-S corporate taxes. So far, it seems like the H&R Block option is in the lead.
Here's why:
- It's cheaper. Amazon lists TaxCut 2005 for Business + Business State for $69.95, while TurboTax Business 2005 lists for $84.95. Both of these prices seem very competitive for the marketplace, by the way.
- TaxCut comes with State. TurboTax usually charges extra for software to assist in the preparation of state taxes. Some Subchapter-S corporations will have to pay taxes in multiple states if they do business there. The cost of doing so may outweigh the benefits of being a Subchapter-S corp. Talk to your tax advisor about this interesting topic.
Though TurboTax for business obviously has some benefits, too. They offer the ability to integrate directly with QuickBooks (they make both products). Intuit, I believe, has been making tax software for longer than Block financial, which could give them better quality than Block financial, hence the higher price. Too bad neither company will put their money where their mouth is and offer a satisfaction guarantee, or your money back.
After reviewing the software packages, I am feeling kind of confident I could "go it alone" and prepare my taxes myself. TurboTax has an interesting tag line on their business software marketing, something along the lines of "this software is useful even if you have an accountant prepare your taxes" - which makes me think I could do the same one my own, with the help of the IRS website. If you haven't checked it out, their website is actually really helpful. IRS Homepage. Of course, even if I prepare the tax forms myself (for both myself and my business) I will have my accountant review my work before sending them out.
Remember, that when running your own business, you want to keep focused on the actual business itself, your core competancy. You know, stick to your knitting! This is good advice, advice that I need to take myself! Finding trusted avisors for exterraneous, yet crucial, aspects of your business is a must. Get to know a good lawyer, accountant, head hunter, sales coach, among other professionals, and you'll be glad you did. I know I am.
After learning more about small business finances and their tax implications, I've decided to go with a Roth IRA.
I also just checked out the TurboTax competitor for online filing of personal tax returns, TaxEngine.com. I went through the forms and it was pretty good, and would have been free for me, though it doesn't have Schedule K-1 income for business income / losses. So I'm back to TurboTax online.