When you’re a sole proprietor, you report the income you earn or losses you incur from your business on your personal tax return (IRS Form 1040). If you form a one-owner limited liability company, you’re ordinarily taxed the same as a sole proprietor. Meaning you have a one-owner business and have not formed a corporation or other business entity. You’re a good candidate to prepare your business tax return yourself if, like most self-employed people, you’re a sole proprietor. What type of business tax returns are best to prepare yourself? You can then use those returns as a guide to doing your own returns in future years.
One way to make your life easier is to hire a tax pro to prepare your returns the first year you’re in business. In this event, the IRS likely won’t bother you. Just as bad, you could end up paying more than legally necessary. You could pay less than you owe and end up in trouble with the IRS. You might be better off using this time working in your business.Īlso, you could make costly mistakes if you do your taxes yourself. One good reason not to prepare your return yourself is that it will take time.
And you may come up with ideas on how to save on taxes in future years. You’ll have a better understanding of what expenses are and are not deductible. You can deduct that amount.Īnother benefit of doing your taxes yourself is that it helps you understand the tax law and how it affects your bottom line. If you hire a tax pro to do your personal and business taxes, make sure to get a separate invoice for the business portion. How much depends on your top tax rate.īy the way, the fees you pay to prepare your personal tax return are not deductible. But this deduction will reduce only part of the entire cost. The fees you pay to prepare your business taxes are a deductible business expense. You could have to pay much more depending on your complex your business is. Tax pros charge at least $500 to prepare a business return. You’ll save money doing your taxes yourself. Indeed, a majority of all taxpayers hire tax preparers. That said, most business owners prefer to get tax pros to do their tax returns. There is no legal or IRS requirement that business owners hire a tax professional to prepare their returns. The short answer is “yes,” you can do your return yourself. If you have a business, can you prepare your tax return yourself? Should you?