What's your favorite season of the year? Whichever it is, one thing’s for sure: It’s not tax season. As a small business owner, you know that filing your taxes is time-consuming, expensive, and laborious.
With so many different types of software and services available, it can be downright impossible to find the best way to do taxes. But there’s good news: You don’t have to.
We’ve looked at some of the best tax filing software -- and other options -- to help you come to a decision that doesn’t break the bank. Here's how to save money and time when tax season rolls around.
1. The Best Free Online Tax Filing
You've no doubt seen countless advertisements and commercials from companies promising free filing software. But what's the catch? Is it too good to be true?
Sort of. Not everyone qualifies for free tax filing services. But if you do, you should absolutely take advantage of the program.
The IRS offers the Free File program to those with an income of $69,000 and below. This is a collection of subsidized tax services, each with its own qualifications.
For example, only service members earning $69,000 or less can enjoy TurboTax for free. An average citizen can't make more than $36,000. These individualized criteria make it difficult to locate your best free filing option.
Thankfully, you can use the Free File online lookup tool to narrow your options to those you qualify for. Most of these services, if not all, should cover your Schedule C and other complicated tax documents without a surcharge.
2. Cheap Tax Return Software
In a perfect world, your Schedule C would be as easy to file as a W-2. Unfortunately, that's not the case. It should come as no surprise that complicated returns are more work for tax software developers and thus more expensive for consumers to use.
Be prepared to pull out your checkbook if you don't qualify for the IRS Free File program. Still, using tax return software can save you hundreds of dollars compared to working with a living, breathing tax professional.
So what's the best filing software for small business owners?
If you are familiar with tax terminology and have filed a few times before, consider eFile. Their most robust, premium service costs only $50. Some business owners may only need the deluxe version, such as those taking the standard deduction rather than business deductions.
But you do get what you pay for. eFile is the cheapest business filing software, which means it's less helpful than other alternatives. If you're not comfortable with tax filing, it's better to go with an expensive service to ensure you file your taxes correctly and get the return you deserve.
For companies who use QuickBooks, get your hands on TurboTax Business. You can upload your Quickbooks data to your return with the push of a button, streamlining the filing process.
Keep in mind the business version of TurboTax is downloadable software that cannot be used on a web browser. It's also your most expensive option at around $170 for a federal return and about $50 for state returns.
If your business doesn't rely on QuickBooks and you need extra help navigating business taxes, choose TaxAct. It's much cheaper than TurboTax and allows you to file your return online if you so choose.
3. Relying on a Tax Professional
On average, filing your taxes through a professional costs $216. Small business owners, especially those with more complicated returns, can expect to pay significantly more than the average.
So why would you ever use a professional? In some cases, it just makes economic sense. If your time is more valuable than the expense of a professional, using one is a no-brainer.
Most tax professionals also offer a refiling clause should something go wrong with your return. This can offer protection and peace of mind you won't find by going it on your own.
Not to mention, navigating business deductions could leave plenty of money on the table if you do it wrong. Using a professional maximizes your return, which could justify the increased expense.
That's why, in some scenarios, filing through an accountant is the best choice for those on a budget. Odds are, it'll pay for itself.
4. Managing Tax Debt
Since small business owners have complicated returns and small budgets, many inadvertently accrue tax debt. Thankfully, debtors' prisons are illegal, but the IRS guarantees you'll pay them back through wage garnishment and other practices.
This can throw a wrench in the operation of any small business.
If you owe the IRS due to a filing error or misunderstanding, you do have recourse. You should take advantage of an offer in compromise, which allows you to pay off your debt for less than you owe. It's an easy, stress-free way to keep your business running.
But you shouldn't go it alone against the IRS with your taxes. Get offer in compromise help from trusted tax attorneys.
So What's the Best Way to Do Taxes?
If your small business is still getting started, you can likely file your tax returns for free. Otherwise, you'll have to decide between a tax professional or tax filing software.
At the end of the day, the best way to do taxes is completely up to you. Just make sure you don't spend more than you have to.
Tax season isn't the only time to save as a small business owner. For more help maximizing your bottom line, stay tuned into our blog. Visit the Finance section of the Bootstrap Business Blog for more tips on taxes and accounting on a frugal budget.
