If you own a small business, chances are you spend a lot of time trying to decide which things you should do yourself, and which you should pay someone else to take care of. Running a small business can be very lucrative, but it's also really important to keep your costs low to maximize how much you can make.
The saying time is money is absolutely true. Every minute you spend on administrative tasks is a minute you're not spending doing whatever it is your business does. It's all about finding a balance between doing some things in-house, when it makes sense, and hiring some out. As a self-employed writer and the prior owner of a small business, this is something I'm intimately familiar with. And in my experience, there are a few key questions you can ask yourself that can guide you to striking the right balance.
Have you done taxes before?
Millions of people do their personal income taxes at home every year. Tax preparation software has gotten so good and easy to use that, frankly, more people should probably be doing their taxes. After all, even when you hire a tax professional, it's still your responsibility to collect and maintain all of the relevant tax documents each year.
These can be far more than just your pay statement from your employer. The list can include statements from your mortgage lender, tax forms from banks and brokerages, receipts for charitable giving, records of child care expenses, and a litany of other things that can help lower your tax bill.
If you've prepared your personal income taxes, especially if you itemize your deductions, then it very well may be the smart move to do your business taxes, too. But if you've never done your taxes, learning on the job with your business taxes could end up costing you more in time than you save by not hiring a professional.
Is your business a side gig?
In recent years, a lot of people have started a part-time side hustle for extra income. While these endeavors are technically small businesses, they often don't add the level of complexity that a typical small business does.
For instance, they are generally operated out of your home and don't require employees, or big investments in equipment or other property. Furthermore, they're generally treated as a sole proprietorship without any extra corporate layers between you and the earnings they generate.
If that's the case, your business taxes will be inextricably mixed with your personal income taxes. And there are also a bunch of tax breaks you may be able to get by running your business from home.
Here's the good news for those of you inclined to do your taxes yourself: Tax preparation software will walk you through pretty much everything, asking you the right questions to identify ways to lower your taxes (legally, of course), while also reducing your chances of being audited. Again, it's a matter of whether you're willing to spend a few hours doing it yourself to save a little money, or you'd rather pay a pro and not have to deal with it.
Do you make a product or keep inventory?
For this factor, consider the complexity of your operation. If it's just a side hustle selling items you knit in your spare time, for instance, then your taxes may still be simple enough to do yourself.
But if you run a retail operation or sell products online and maintain a lot of inventory as well as equipment and property, there's a good chance that paying a pro to handle your taxes is the smart call. Even if you're a veteran at doing your personal taxes, the sheer amount of time you can save by hiring a tax pro is probably worth the expense.
Do you have employees?
Unless you're also an accountant by trade, if you have employees, you should probably have both a bookkeeper and a tax preparer in your contact list. Any business that's big enough to employ people may also have a lot of tax complexity. An experienced bookkeeper can help make sure you have and retain the proper records that your tax pro can then use to make sure you've paid your fair share, but not a penny too much.
Time is money: Where can you be most effective?
That's really what it boils down to. If you run a side hustle or some other small business that's inseparable from your personal income taxes, and it's relatively straightforward, it might be worth the money savings to do your taxes yourself.
But if it takes you away from doing something that's more productive or profitable, doing your taxes yourself is probably not your best option. Paying a pro will free up more of the most valuable thing your business has: You.