Pros and Cons of Doing My Own Business Taxes

Hallelujah! I’ve finished my 2018 taxes. It was no easy task. This year, my second year in business, I decided to do my own taxes with TurboTax. (Last year I had a CPA do them for me because I had zero clue about what was involved.) Since doing my own taxes this year was quite the harrowing experience, I wanted to summarize the pros and cons.

Pros

• Save money instead of paying a CPA to do it for you
• Understand the finances of your business better
• Get more organized with documentation
• More in control of when it goes done instead of relying on someone else’s schedule

Cons

• You could be doing it wrong lol
• Takes a lot of time and research
• Can get stuck on questions that you don’t know how to answer
• Could be missing out on some deductions

It is quite a tricky balance. Doing my own taxes was a huge time commitment. When it comes down to it, the hours that I spent on it probably could have been spent on my business earning enough to cover the cost of a CPA. However, despite all those cons, I feel like the educational value I got from the experience far outweighed everything else. And the long-term effects of this newfound knowledge will serve me well beyond the tax season.

Yes, taxes are a necessary evil to keep your business running. But at the same time, the process is so detailed that you must pour over the details of every dollar that went in and out of your business. I was in Google spreadsheets forever filtering, categorizing, sorting, and summing up all sorts of columns and things. I had to login to all my accounts and figure out when things happened and make sure I didn’t miss anything.

In a way, it was re-living my entire past year and all the financial decisions I made and results I received. It made me extremely reflective on what were some not-so-great choices about how I spent my money and what activities were very effective in getting an ROI.

It made me very aware that even though a new business owner gets BOMBARDED with ads for classes, tools, events, resources, etc.., in the early days, you really don’t need all of those things. You need to get your way to a good business model and try to operate as leanly as possible.

I know that going into this coming year, I’m going to try to keep impeccable records and do proper bookkeeping as I go. Because I don’t want to deal with the frustration of going through a whole year of records at the end of this year, like I had to do for last year. Once you know the documentation and format of numbers you’ll need for tax time, it makes it easier to know what to keep and to use some sort of organizational system. Mine is still a bit ad-hoc at the moment. 🙂

Highlights on What I Learned

• Track every source of business income
• Count inventory at the end of each year (books in my case)
• Download all business bank account and credit card statements for record keeping
• Track car mileage for business purposes
• Track all home expenses, figure out size of home office, and you can get a deduction as a % of your home expenses
• Some expenses like phones or internet bills can also be deducted at a percentage based on how much you use them for work vs. personal use
• Track business expenses. Here are some examples for me last year: advertising/promotional costs (like online ads, book launch party, business cards, supplies for events), business travel (went on a trip to NY for a workshop with my business coach), legal and professional fees (coach, lawyer, professional association membership dues), meals with clients or when traveling, educational expenses (classes, magazine subscriptions, events), shipping supplies (for my book), software subscriptions, license and fees (city business license fee), equipment (vlogging camera and payment reader), and other miscellaneous expenses.

It’s pretty great how many deductions you can get as a business owner! It’s just that you need to keep good records to back up everything you want to deduct, in case you get audited (hopefully not!).

I also must include that I could not have finished my taxes without the amazing help of my CPA friend Wendy (@thetaxmuse). She specializes in working with creatives and small business owners and has free tax tips + resources on her Instagram page (go follow her!).

I attended 3 of her group tax workshops, where she thoroughly answered so many of my newbie tax questions. Her first workshop was actually last year back in October, when she first advised us entrepreneurs to start getting our papers in order and reviewing the year’s numbers. (Even though I started back in last Fall, it still took me a long time! I wasn’t very organized…) Anyhow, without her help, I can’t imagine being able to do it on my own otherwise.

Hence, if you decide to do your own taxes in a future year (it’s probably too late to do that this year), try to find someone you can ask for help. Turbo Tax is great, but sometimes it’s hard to figure out where to put numbers or how to answer their multiple choice questions.

Okay best of luck! Hope you can get lots of tax savings $$! And more importantly, I hope you can become more empowered with tracking the numbers in your business!

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Photo by 3Lopez