Why You Need a CPA For Your Home-based Business

Running a home-based business comes with a ton of benefits, not the least of which is working for yourself. But just because you’ve successfully gotten rid of your morning commute doesn’t mean you lack other challenges specific to working from home. One of the most challenging aspects is managing finances. While you’re creating your service or product and marketing your wares, who’s watching the books? Most experts agree that a CPA is not only valuable but necessary for home-based business owners. From reducing tax liabilities and handling payroll taxes to providing business advice and conducting audits, a CPA can put your home-based business in a stronger financial position.

Help Your Business Reduce Tax Liabilities

Operating a home-based business creates many tax benefits, but only if you know how to take advantage of them. These benefits can greatly offset tax liabilities. Some are obvious, like being able to deduct a portion of your home mortgage or rent. But others are less obvious to non-professionals. With just a few business changes, you might be able to avail of additional tax benefits that you were never aware of. As a tax expert, your CPA stays up-to-date on all the new tax laws and benefits; knowledge that they can use to benefit their clients. Having your CPA offer advice and strategies to maximize benefits and minimize taxes is a big reason why you need a CPA for your home-based business.

Keep Tax-related Records

Successful home-based business owners are very organized; they have to be. And keeping accurate and organized tax records throughout the year is essential for ensuring compliance with tax laws and for making the tax filing process easier. But tax records are notoriously challenging to keep track of, especially when one owner is wearing all the hats. It can also be confusing as to what papers are important and which can be tossed. In the end, you can easily end up with a huge pile of “to be filed” papers that looks more like a heap of jumbled mess than important tax records. A CPA can maintain all your tax-related records, ensuring that everything is properly documented and stored in case of an audit or tax query. This includes tracking receipts, invoices, and other business expenses, as well as managing depreciation schedules, payroll records and mileage logs.

File Taxes

No one looks forward to filing taxes, especially home-based business owners. It’s a daunting task that most people avoid until the last minute. But missing deadlines, filing incorrect forms, or failing to pay taxes owed can result in penalties, fines, or even audits. A CPA is qualified to handle all of your business’s tax filings, ensuring that everything is done correctly and on time. The urgency of having a CPA as a home-based business owner is made more apparent, since the IRS takes a much harder look at home-based businesses than they used to. You definitely want to have all your i’s dotted and t’s crossed in order to avoid an audit.

Provide Business Advice

You may have started your home-based business all on your own, but it’s hard to sustain that business and grow it all by yourself. As the business grows, you’ll need more and more professional advice, particularly if you ever want to involve shareholders, a Board of Directors, change your business entity, apply for a business line of credit, bring on investors and more. CPAs can also help you develop financial forecasts, which are essential for business planning. By projecting your future income and expenses, a CPA can help you prepare for growth, manage cash flow and identify potential financial challenges before they become serious issues that can jeopardize your business.

Act as a Business Partner

Being the sole owner is a lonely affair. You alone are responsible for all the business decisions. If you make a wrong decision, you can’t blame anyone else. And frankly, you’re likely to make a few wrong decisions, since you can’t possibly know everything you need to know in advance. So unless you have a crystal ball in the closet, chances are you’ll do at least one thing that you wish you hadn’t, like max out your credit card, offer too-broad payment terms to a client, or forget to make collection calls. Having a CPA on board means you have someone knowledgeable to bounce ideas off of, similarly to a business partner. And, even though they aren’t actually your business partner, it can feel like you’re not alone anymore. 

Handle Payroll Taxes

Managing payroll taxes is another area where a CPA can make life easier for home-based business owners. Payroll taxes involve more than just deducting income taxes from your employees' wages. You also need to calculate and pay Social Security, Medicare, unemployment taxes, and possibly other local taxes, depending on where your home-based business is located. Remember, as an employer, you're responsible for making regular payroll tax deposits and filing quarterly and annual payroll tax reports. A CPA can handle all aspects of payroll tax management, from calculating withholdings to filing the necessary paperwork with the IRS and state agencies. This not only ensures compliance but also frees up your time to focus on other parts of your business.

While it’s not mandatory for every home-based business to hire a CPA, the benefits of having one can significantly impact the success and growth of your business. From reducing tax liabilities and ensuring compliance with tax regulations to providing valuable business advice and handling payroll taxes, a CPA can save you time, money, and stress. If your home-based business could benefit from any of the services mentioned above, hiring a CPA might be one of the smartest decisions you make for your business’s long-term financial health.

by Kate Supino