{Here is a great guest post from Patrick, who writes about personal finance and career topics at Cash Money Life and military money topics at Military Finance Network. I wrote a series of guest posts on Self-Employed Retirement Plans for Patrick at CASH MONEY LIFE a while back. Links to these posts appear in the right hand margin - scroll down a bit. Thanks, Patrick! – rdf}
A couple years ago I started my own business. The first few months were underwhelming to say the least. Actually, if I were to put an hourly wage on my labor the entire first year it probably would have been on par with someone in a third world country. I probably would have been able to survive fairly well for a year in many third world countries - or possibly afford one month's rent for a one bedroom apartment in a major city like New York. As time went on I learned more about my business and I began to earn more money.
The second year I earned substantially more than my first year and I was faced with several issues I hadn't previously considered - such as forming an LLC for my company, obtaining an EIN, opening a self-employed retirement account, opening business savings and checking accounts, paying estimated taxes, depreciating company assets, and more. But by the time tax season rolled around I was drowning in a sea of paperwork.
Thankfully, I kept all my business and personal paperwork separate. I filed each pay stub or receipt from a business expense in two large manila envelopes marked "income" and "expenses." I also had an envelope for my official business papers, including my Articles of Organization for my LLC, my Solo 401k paperwork, etc. Separation and organization are paramount!
I did plenty of research before it was time to file my taxes, but all the new information and the more complicated tax situation made me want to get a second opinion. I wasn't sure if I needed an accountant or not. Honestly, I was fairly confident I could file my return and be able to withstand an audit. But I also wanted to make sure I wasn't leaving money on the table by paying more than I should or making any mistakes that could bring the IRS knocking at my door.
So I asked around and found a couple leads, then I interviewed a couple accounting firms. Lucky for me, the best mix of small business experience, specializations, and cost was also the firm that was closest to my home. But this is one case when I wouldn't mind driving across town.
I ended up hiring that firm and I dropped off my taxes (at this point I had already completed them, but I wanted a second opinion). It turns out my calculations were spot on. But I don't consider it wasted money - in fact, I was more than happy to pay. You see, they gave me peace of mind. I knew the job was done correctly, and I now had someone to back me up if I were to ever get audited. I also had several discussions with my accountant about the best way to handle my taxes in the coming year and we made a change to my filing status and a few other fun things that should save me money this year, and hopefully in future years. And that is why I wanted to find an accountant in the first place - to give me peace of mind, and save me money in the long run.
This year I will drop off copies of my papers once I receive all my 1099s and I will rest knowing that the person doing my taxes will not only be doing them more efficiently that I ever could, but is using a plan that we worked on together. The point isn't to outsource everything and never think about it again - far from it. I still go over everything and make sure I understand each line on my taxes. But I also want a professional opinion and I want to know the job is done right. Being able to call a person whenever I need to discuss a tax issue is much better than doing an online search or clicking buttons on a desktop software program.
TTFN
A couple years ago I started my own business. The first few months were underwhelming to say the least. Actually, if I were to put an hourly wage on my labor the entire first year it probably would have been on par with someone in a third world country. I probably would have been able to survive fairly well for a year in many third world countries - or possibly afford one month's rent for a one bedroom apartment in a major city like New York. As time went on I learned more about my business and I began to earn more money.
The second year I earned substantially more than my first year and I was faced with several issues I hadn't previously considered - such as forming an LLC for my company, obtaining an EIN, opening a self-employed retirement account, opening business savings and checking accounts, paying estimated taxes, depreciating company assets, and more. But by the time tax season rolled around I was drowning in a sea of paperwork.
Thankfully, I kept all my business and personal paperwork separate. I filed each pay stub or receipt from a business expense in two large manila envelopes marked "income" and "expenses." I also had an envelope for my official business papers, including my Articles of Organization for my LLC, my Solo 401k paperwork, etc. Separation and organization are paramount!
I did plenty of research before it was time to file my taxes, but all the new information and the more complicated tax situation made me want to get a second opinion. I wasn't sure if I needed an accountant or not. Honestly, I was fairly confident I could file my return and be able to withstand an audit. But I also wanted to make sure I wasn't leaving money on the table by paying more than I should or making any mistakes that could bring the IRS knocking at my door.
So I asked around and found a couple leads, then I interviewed a couple accounting firms. Lucky for me, the best mix of small business experience, specializations, and cost was also the firm that was closest to my home. But this is one case when I wouldn't mind driving across town.
I ended up hiring that firm and I dropped off my taxes (at this point I had already completed them, but I wanted a second opinion). It turns out my calculations were spot on. But I don't consider it wasted money - in fact, I was more than happy to pay. You see, they gave me peace of mind. I knew the job was done correctly, and I now had someone to back me up if I were to ever get audited. I also had several discussions with my accountant about the best way to handle my taxes in the coming year and we made a change to my filing status and a few other fun things that should save me money this year, and hopefully in future years. And that is why I wanted to find an accountant in the first place - to give me peace of mind, and save me money in the long run.
This year I will drop off copies of my papers once I receive all my 1099s and I will rest knowing that the person doing my taxes will not only be doing them more efficiently that I ever could, but is using a plan that we worked on together. The point isn't to outsource everything and never think about it again - far from it. I still go over everything and make sure I understand each line on my taxes. But I also want a professional opinion and I want to know the job is done right. Being able to call a person whenever I need to discuss a tax issue is much better than doing an online search or clicking buttons on a desktop software program.
TTFN
