Cost to have small business taxes done

How Much Does It Cost to Have Small Business Taxes Done?

Tax prep paper crumbled

For small business owners, tax season can be a stressful and overwhelming time of year. Beyond the complexity of navigating tax laws, understanding the cost of tax preparation is a crucial part of running a successful business. Many small business owners find themselves asking, “How much does it cost to have small business taxes done?” The answer depends on several factors, such as your business structure, the tax service types needed, and whether you hire a professional or use tax software.

This article explains what you’ll pay for small business tax preparation based on your business structure. You’ll learn the key factors that influence these prices and smart ways to keep your tax preparation costs budget-friendly.

Small Business Tax Preparation Basics

Tax filing becomes smoother for small businesses with the right preparation and documentation. These are the foundations of good tax management that help business owners save time and money.

Required documentation and preparation

Business owners should have these important documents ready for their taxes:

Business identification (EIN and state registration numbers)
Financial statements (income statements and balance sheets)
Asset purchase information and depreciation schedules
Employment records (W-2s, 1099s, and payroll documents)
Supporting transaction documents

Time investment considerations

Tax preparation demands significant time from business owners. A National Small Business Association survey shows that one-third of small business owners dedicate more than 80 hours to tax preparation. Almost 60% of small businesses say administrative tasks are their biggest challenge with federal taxes.

Common filing requirements

Your business structure determines your filing requirements. Sole proprietors and single-member LLCs must attach Schedule C to their personal tax returns. Corporations must file Form 1120-S or 1120’s by March 15. Businesses that have employees must file quarterly employment tax returns through Form 941 and yearly unemployment tax returns with Form 940.

Small businesses should make estimated tax payments when they expect to owe $1,000 or more in federal taxes. This threshold drops to $500 for C corporations. The IRS requires proof of all income sources and claimed deductions, so business owners should keep their records organized throughout the year.

Cost Factors for Different Business Types

Tax preparation costs vary substantially depending on a business’s structure and complexity. Yes, it is helpful to understand these differences so business owners can properly budget for professional tax services.

Sole proprietorship tax preparation costs

The most straightforward business structure usually comes with the lowest tax preparation fees. A simple Schedule C preparation costs around $220. You can expect to pay about $220 for professional tax preparation if you include standard deductions and state returns.

LLC and S-Corp filing expenses

Limited Liability Companies need more complex filings, so their preparation costs are higher. LLC tax preparation fees start at $220, especially when you have partnerships ($500) and corporate returns ($600).

These costs depend on several factors such as the quality of your accounting records, transaction volume, payroll documentation, asset depreciation calculations, and your state’s filing requirements.

Multi-state business considerations

Companies operating in multiple states face extra complexities and costs. Each state or tax jurisdiction usually adds $250 to $350 to your preparation fee. States with complex tax regulations like California and New York need more detailed documentation and take longer to prepare.

Businesses expanding to new states should look at each state’s filing requirements, sales tax compliance, local business tax regulations, and required licensing fees. Running operations in multiple jurisdictions makes everything more complex because each state may have its own reporting requirements and deadlines.

Choosing the Right Tax Preparation Method

Businesses must think over multiple factors when choosing a tax preparation method. Business tax requirements have grown increasingly complex.

Evaluating business complexity

Business owners should base their tax situation assessment on the following:

Transaction volume and types
Number of employees
Multi-state operations
Investment activities
Industry-specific regulations

Comparing service provider options

Tax preparation options differ in cost and service levels:

Method	Base Cost	Support Level
DIY Software	$129-249	Simple
Professional Service	$220-800	Detailed
CPA Firms	$800-1,800	Expert

DIY software saves money, yet 60% of taxpayers opt for professional tax services. The final choice depends on business complexity and internal capabilities.

Cost-benefit analysis of each method

Professional tax preparation provides returns through:

Increased accuracy and compliance
Time savings (average 13 hours saved per return)
Identification of tax-saving opportunities

Tax compliance costs have risen by 32% from 2017 to 2023. Businesses need to weigh both immediate costs and long-term benefits when choosing between DIY and professional services. Small businesses with simple finances might find DIY software adequate. Companies with complex operations benefit from professional assistance.

Professional help becomes crucial for businesses that operate in multiple jurisdictions. Tax audits are now mandatory in 95% of jurisdictions worldwide. This requirement highlights the need for accurate tax preparation and compliance.

Strategic Ways to Reduce Tax Preparation Costs

Smart planning and modern tools help businesses cut down their tax preparation expenses. Good organization throughout the year saves money during tax season.

Year-round bookkeeping best practices

Accurate financial records help businesses spend less on tax preparation. A well-laid-out approach has these elements:

Separating business and personal finances
Organizing financial documents systematically
Tracking all business expenses consistently
Reconciling accounts monthly
Maintaining proper documentation for deductions

Technology and automation solutions

Modern businesses can exploit various automated solutions to streamline their tax preparation process. Tax software cuts manual labor costs by 30-40%.

Automation Benefits	Impact on Costs
Data Entry	Reduces manual hours
Document Organization	Minimizes prep time
Error Detection	Prevents costly mistakes
Real-time Tracking	Enables better planning

Cloud-based solutions make it easy to work with tax professionals remotely with their accessibility and collaboration features.

Timing strategies for better rates

Smart timing combined with proper planning results in better rates for tax preparation services. Small businesses should focus on:

Early preparation during off-peak seasons
Regular consultation with tax professionals throughout the year
Organizing documentation before tax season begins
Implementing year-round tax planning strategies

Small business owners save 13 hours on tax preparation when they keep organized records throughout the year. Tax professionals give better attention and offer favorable rates during off-peak seasons.

These strategies help businesses control their tax preparation costs better. The IRS confirms that proper documentation helps avoid extra charges from disorganized records.

Our Tax Preparation Fees Structure At Akron Income Tax Co.

At Akron Income Tax Co., our tax preparation fees are structured as follows:

Basic Short Form: $130, which includes the first hour of preparation.
Basic Long Form: $220, covering up to 1.5 hours of preparation.
Business Returns: An additional $90 plus time charges, with the taxpayer providing totals of income and expenses.
Rental Property Returns: An additional $90 plus time charges, with the taxpayer providing totals of income and expenses.
Partnership Returns: These returns start at $500 which include 4 hours of preparation.
Corporate Returns: These returns start at $600 which include 4 hours of preparation.
Time Charges: We expect to receive totals for income and expenses and our “free” preparation time should cover what is needed to complete the above returns.

After the initial preparation time, a time charge of $25 is applied for every additional 15 minutes. For example, a basic return with a business component would be $220 ($130 for the basic form plus $90 for the business addition).

Please note that more extensive tax documents requiring additional time may incur higher fees.

Benefits of Professional Tax Preparation

While some small business owners prefer to handle taxes themselves, hiring a professional has several advantages:

Accuracy: Tax professionals minimize the risk of errors and ensure compliance with federal and state tax laws.
Time Savings: Focus on running your business while an expert handles your taxes.
Maximizing Deductions: Professionals are skilled at finding deductions and credits that business owners might overlook.
Audit Support: If the IRS audits your business, a tax professional can represent you and provide expert guidance.

DIY vs. Hiring a Professional: Which Is Right for You?

Whether to handle taxes or hire a professional depends on your business’s size and complexity.

DIY Tax Preparation

Pros: Cost-effective, suitable for simple tax situations.
Cons: Risk of errors, limited access to expert advice.

Hiring a Professional

Pros: Expert insights, reduced audit risk, time efficiency.
Cons: Higher upfront cost.

Cost-Saving Tips for Small Business Tax Preparation

While tax prep is a necessary expense, there are ways to save without sacrificing quality:

Keep Organized Records: Keeping accurate and organized financial records all year round can save you a lot of time on tax prep. Use spreadsheets or accounting software to categorize transactions, store receipts, and track income and expenses.
Use Accounting Software: Get accounting software like QuickBooks, FreshBooks or Xero to keep your books in order. Many tax pros offer discounts if your books are already in shape.
Bundle Services: If you need multiple financial services like bookkeeping, payroll and tax filing, consider bundling with the same provider. Many firms offer package deals that reduce the total cost.
File Early: Start your tax prep early to avoid rush fees. Tax pros charge extra for last-minute filings during peak tax season.
Claim All Eligible Deductions: Work with a pro to claim all eligible deductions. Common deductions are home office expenses, vehicle expenses, travel costs and employee benefits. Reducing your taxable income can offset the cost of tax prep.

FAQs

How much does it cost to prepare small business taxes?

The cost of hiring a tax professional ranges from $500 to $2,000, depending on the complexity of your taxes and the services required.

Can I deduct tax preparation fees from my business taxes?

Yes, tax preparation fees are considered a deductible business expense. You can include these costs on your business tax return, reducing your overall tax liability.

What is the best time to hire a tax professional?

The best time to hire a tax professional is early in the year, preferably before tax season begins. Early preparation helps avoid rush fees and ensures enough time to gather all necessary documents.

Are online tax preparation services reliable?

Yes, online tax preparation services like APC1040 are reliable for all types of tax filings. However, businesses with complex tax needs should consider working in person with a tax professional for personalized advice and compliance.

Conclusion

Small business tax preparation is an essential yet often daunting task. While costs vary widely based on factors like business structure, complexity, and location, it’s crucial to weigh the benefits of hiring a professional against the affordability of DIY solutions. Ultimately, the goal is to ensure compliance, maximize deductions, and minimize the risk of errors.

If you’re looking for expert assistance with your small business taxes, APC1040 offers comprehensive services tailored to your needs. Our team of experienced professionals is committed to helping you navigate the complexities of tax preparation while saving you time and money.