If your business has reached the point where doing your own taxes is too big a task, you might want to consider taking them to a retail tax service. Here’s a look at what some of the leading tax prep services can—and can’t—offer you this tax season.
Cost and Convenience
It’s hard to beat retail tax prep services for convenience, but convenience isn’t worth much without peace of mind. Thankfully, it is an industry standard for these services to offer some form of free accuracy guarantee. H&R Block, Liberty Tax, and Jackson Hewitt, three leaders in the field, all promise full reimbursement of tax penalties resulting from mistakes made in filing your return.
An extra $35 at H&R Block gets you the Peace of Mind Extended Service Plan, under which the company will pay up to $5,500 of additional owed taxes assessed by the IRS and provide you with qualified representation in the event of an audit. For an additional (and unspecified) fee, Jackson Hewitt offers its Gold Guarantee, which provides the same coverage as the H&R Block’s Peace of Mind service, but will only cover $5,000 of additional owed taxes. Liberty Tax offers audit representation free of charge, but does not advertise any guarantee to cover additional taxes assessed by the IRS.
Security aside, there’s also the matter of getting the biggest return possible. “As we’re growing, it’s all about strategic tax planning,” says Elyissia Wassung, co-owner of the South River, New Jersey–based chocolate retailer 2 Chicks With Chocolate. “If you want to be able to take advantage of all your deductions, it really pays to use a pro.”
Exactly how much it will cost for one of these services to find those deductions for you depends on the complexity of your return. Pricing for the most complicated returns is difficult to determine ahead of time since retail services typically charge by the form. It is worth noting, however, that while H&R Block and Jackson Hewitt did publish their average tax prep fees for 2010 ($189 and $208 respectively, though those figures include more straightforward individual returns), Liberty Tax did not.
|Note: This article is Part Three of a three-part series on tax filing options for small businesses. Part One, which focused on tax prep software, can be found here. Part Three looks at when it might be appropriate to hire an accountant and is posted here.|
A Personal Touch
One possible downside to using a retail tax service, where employee turnover can be high, is that you may not be able to establish a long term—and year-round—relationship with a tax professional. One possible way around that conundrum is to request an enrolled agent (EA) to prepare your taxes. While they cost more, EAs are licensed by the government to prepare tax returns, having either passed a comprehensive exam or worked at the IRS for a minimum of five years. They must also complete ongoing professional education.
“A beginning stage company should take advantage of [an EA],” says Richard Wooley, principal partner at the business-consulting firm Bond/Wooley Inc. Since many EAs are also certified financial planners or accredited tax advisors, working with one now could prove fruitful in the long run.
Wooley, a serial entrepreneur himself, also encourages entrepreneurs to consider taking their taxes to a tax prep service that operates on the H&R Block model but isn’t part of a national chain. For instance: “Going to a tax prep company that is family run, you find people who are always there and you get a continuity of service that really helps.”
Whether or not you can find that continuity of service at a national chain will depend on the quality of the offices near you, but H&R Block, Jackson Hewitt, and Liberty Tax all offer year-round tax and financial advice, so it is still possible to get your questions answered even when it isn’t tax season.
Taking the Next Step
As the corporate structure of your company becomes more complex, you will reach a point when it’s worth it to have the same person doing your taxes every year. When this happens, consider weighing the services provided by a retail tax preparer against those of a licensed CPA. “The biggest education I ever got was from a CPA I hired. He taught me how to maintain a business as opposed to just operate it,” Wooley explains. For much more on when to consider the move to a CPA, be sure to read for Part III of our series by clicking here.
Finally, if you need help determining the best option for you, don’t be afraid to ask around. “Ask your friends who might be business owners and find out what they recommend,” says Wooley. “Whatever you do, don’t just go to the place across the street. Finding the right person to do your taxes is all about pounding the pavement.” As any small business owner knows, it pays to shop around.
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