Small Business Tax Prep | How much does it cost? | Emerald Expectations

Apr 23, 2024Taxes

As an Enrolled Agent (EA) and the owner of Emerald Expectations, I aim to help small businesses navigate the often complicated tax prep and filing landscape. Hi! I’m Kimberly Ferguson, committed to simplifying tax terms and topics for small business owners.

At Emerald Expectations, we specialize in preparing small business tax returns and have helped numerous business owners save as much as possible when filing their taxes. If you’re wondering if you fall under the term “small business,” there are several ways to define what a small business is. But if you are generally a small start-up with five or fewer employees, you are a small business.

One of the most commonly asked questions is, “How much is the average cost of tax preparation by a CPA for a small business?” Read on to find out.

How much does tax preparation cost for a small business?

While we would love to answer with an exact amount, there is no one answer to this question. If you do a quick online search, you’ll see a range from $100/hour to a couple of thousand dollars for the entire task of helping a business prepare its taxes for filing. The actual cost depends on a wide variety of factors.

One of the main reasons for the differences in the cost of tax preparation and business tax filing is the business entity type. The kind of entity will affect the complexity of the return, which will then affect the cost of the tax preparation. It goes without saying that the more complex the return, the higher the cost of tax preparation.

According to a recent National Society of Accountants survey, the cost of preparing taxes for a partnership is about $177.29 per hour. For a corporation, it’s about $181.57. The costs of the tax forms also vary, from $41 per form for a self-employment tax form to as much as $1,289 for an estate tax form. Based on these figures, it’s easy to see why there’s no set amount for tax preparation.

The same survey also showed that a CPA does not require a set amount of hours to prepare and file your taxes. The total number of hours will depend on the specific service, how organized or clean your books are, and if they need anything else to prepare your books for taxes. Some CPAs charge a flat fee for their entire service, while others charge hourly. Again, this means that no one number can be used to answer this question.

Some small business owners prefer to prepare their own books for tax season. This is another possible option, but unless your documents are already well-organized and straightforward, preparing your books is prone to error, especially for someone not well-versed in accounting. For example, the process becomes more complicated if you need to consider payroll for a handful of employees, any business loans you have, or filing back taxes.

While anyone can technically do their own taxes, it doesn’t always mean they should. Small business owners can accidentally miss significant tax deductions or underpay their taxes. Preparing your own taxes might cost you more money in the long run, thanks to possible mistakes, especially if you do your taxes without guidance from a CPA or EA.

Using TurboTax is another option for DIY taxes for a small business, but this option can also add up, especially when your business becomes more complicated, and you need more features than the free version offers. There are well-known firms, such as H&R Block, that offer tax services, and these services start at $85 and go upwards from there. These types of companies bill by form, so the cost can add up very quickly!

For those determined to prepare their own books for taxes, the DIY Bookkeeping Den is an excellent place to start fixing your books for tax season. For those who want more assistance and guidance with preparing and filing their taxes, Emerald Expectations’ offers tax services, which guarantees you are under the watchful eye of tax experts.

When it comes to preparing and filing taxes, Emerald Expectations has several packages that cater to each business owner’s specific needs. For example, you can enroll in the DIY Bookkeeping Den, a step-by-step training program that helps owners master their books for less than $1,000. Other packages depend on how much assistance you want and need when it comes to tax planning and if you want additional services, such as financial planning advice and a fractional CFO).

Tips for saving money with small business tax preparation

While taxes are unavoidable, there are ways a small business owner can save money on tax preparation. Again, this type of information isn’t common knowledge, so it’s best to consult with a qualified tax professional. You may be tempted to Google your way through tax season, but we don’t recommend it! Tax laws constantly change, and you might unknowingly use an outdated article as your tax guide.

Here are some reliable ways you can save money on preparing your taxes:

1. Ensure you have clean books

Again, you can fix your books with the help of the DIY Bookkeeping Den or hire a bookkeeper to ensure they are clean. Having clean books is the first step in preparing your taxes. A bookkeeper’s hourly fee is cheaper than a CPA. So by having clean books, your CPA won’t need to spend more time, meaning more hours, cleaning up the books to do your taxes.

2. Work with an EA

Instead of hiring a CPA to do your taxes, you can work with an EA. If you didn’t know yet, an EA (Enrolled Agent) is a federally-licensed tax practitioner who specializes in taxation and has the right to represent taxpayers before the IRS. The hourly rate of an EA is usually less than a CPA, but they are often-times more qualified…because they specialize in tax.

3. Find a tax prep provider

If you need help, find a smaller service provider, like Emerald Expectations, that can closely guide you and charges less than a bigger operation will. Often, they can also give you more personal advice and treatment because they have fewer customers.

These are several ways you can save money on your taxes, and the best way to figure out all these money-saving ways is to hire a tax professional to guide you through the tax process. Again, preparing and filing taxes is not a skill they teach in school (unfortunately), and you’ll need guidance on how to do it.

Your tax professional, such as Emerald Expectations, can find additional deductible expenses or refunds you would never have figured out on your own. Sometimes, you even end up saving more money than you spend on hiring someone to file your taxes for you.

When should you hire a tax pro to do your taxes?

We’ve talked about this in an earlier article here, but let’s briefly discuss it again.

Small business owners often wonder when they should begin hiring a tax pro to prepare and file their taxes. Again, there’s no one answer to this question. Some small business owners want to start their business with a tax pro already guiding them. Others wait until their monthly sales or revenues hit a certain amount.

So, to answer the question of when in the life of a business should you hire a tax professional to prepare and file your taxes for you? The answer is – it depends. What are your specific needs and wants as a business owner? Do you want someone to help you from the get-go, or do you want to prepare your taxes on your own first?

When it comes to the calendar year, the sooner, the better! It’s best to start working on your taxes from the previous year around September or October. This timeline gives you a few months to fix, change, or settle anything before the end of the calendar year on December 31. After this date, you can no longer use some tax strategies that can help lower your taxes for the year.

Whether you’re hiring a tax pro, like an EA, or a CPA, the timeline doesn’t change.

Should you hire a Certified Public Accountant (CPA) or an Enrolled Agent (EA) to do your small business taxes?

An a CPA and EA are both tax experts, but with several key differences.

As mentioned earlier, a CPA (Certified Public Accountant) is a state-licensed professional with a bachelor’s degree in a related field.

An EA (Enrolled Agent) is a federally-licensed tax practitioner specializing in taxation and having the right to represent taxpayers before the IRS. They can give tax advice and also file tax returns for small businesses and other entities.

Both CPAs and EAs work in taxes as well as other areas of accounting as well, such as an accountant, financial planner, and corporate executive. CPAs can also audit your financial statements.

Again, choosing between a CPA and an EA depends on your needs. If you need someone to prepare your taxes, represent you before the IRS, or give tax advice, you can hire an EA.

If you need financial statements audited and signed off on aside from tax preparation, a CPA can provide this service to you. They can also help you with financial planning and other accounting needs. Put simply, a CPA has a broader range of services under accounting, while an EA is focused solely on taxes. A CPA and EA are very similar, but a CPA can audit your financial statements, and an Enrolled Agent specializes in taxation.

Whether you hire a CPA or an EA, the most important thing is to work closely with them to ensure you are filing the correct taxes and there are no hidden taxes or penalties to settle. Also, you’ll want to ensure you get the tax credits or tax refunds you and your business deserve. A CPA who specializes in taxes and an EA can both help you with significant tax issues.

So, there’s not one answer to how much small business tax prep is because it depends on several factors. The amount varies depending on the entity being filed taxes for, the number of hours needed to get the books organized, and the tax strategies you want to use, among others.

The best thing to do is to work with a tax professional to ensure you are filing correctly and you are making the most out of available tax strategies.

Give Emerald Expectations a call today and start working on your taxes.

Our series of articles on the cost of business accounting

To learn more about how much working with an accountant or tax expert may cost you, please refer to our other articles here:

Small Business Accounting | How Much Does It Cost?

How Much Does a Fractional CFO Cost?

Hi, I’m Kimberly.

Thanks for stopping by. At Emerald Expectations, we love making a big impact on small businesses like yours by educating, growing profits, increasing cash flow, and reducing your tax liability.

If you’re always worrying that something important is falling through the cracks or you feel like your current tax or financial strategy is lacking, we can help you offload that stress so you can feel at peace knowing everything is being taken care of.

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