Do you really need to hire a tax pro?

Many people who run small businesses have a big decision to make when it comes time to do their taxes: Should they do the returns themselves, or seek professional help?

As a tax pro myself, I've seen the kinds of trouble that taxpayers can get into when taking on unfamiliar returns. I also have a general bias in favor of hiring people who are experts in their field, rather than trying to be a one-man gang. I admit that I like taking on little projects and learning something new, especially if I’m going to easily save a few bucks in the process. (I rank "draining your garden sprinkler system" in that category, especially after I hired someone else to do it one year and they snapped the head off of one of the water controls.)

But I don't file my own legal papers, I don't do my own electrical work, and you won't see me up on my roof trying to repaint my chimney.

However, there are people who are wonderful jacks-of-all-trades, and there also are folks out there who can handle their own business tax returns. Do you qualify? Should you bother?

Here are some guidelines to consider when deciding whether your business tax returns are fit into the do-it-yourself category (Pro-DIY), or whether you'll be better off hiring someone else (Pro-Tax Pro).

1. Pro-DIY:   You've already done your own personal returns for several years. You've also been keeping track of your business income and expenses, and understand the concepts of profit and loss statements, and the differences between business expenses and business-asset purchases.

   Pro-Tax Pro:   You haven't done your own returns before, or you've found doing those personal returns to be a struggle.

2. Pro-DIY:   You've used tax software and business record-keeping programs before. You’ve also learned that while the reports the software produces may look just fine, any software program is only as good and accurate as the information entered.

   Pro-Tax Pro:   You're a pen-and-paper kind of person ... which would be all right, except that you’re not so good at remembering what each business check payment was for, or at having the business properly reimburse you for every expense that you put on your own personal credit card. (Hint: Having a large business-expense category called "Expenses charged to credit card" is a sign you shouldn't do your own business returns.)

3. Pro-DIY:   You're a detail person. You like, and are good at, not just tracking and entering information, but also double-checking what you've done to ensure your accuracy. You're a "measure-twice, cut-once" kind of guy or gal.

   Pro-Tax Pro:   Your time is at a premium. You know you could go through the work of doing your own returns, but you have an awful lot on your plate. You'd rather gather up your stuff and give it to someone who handles these things every day than try to educate yourself for a once-a-year event—and maybe still wind up getting it wrong.

4. Pro-DIY:   Your new business return isn't all that different from your former returns. Before starting a business, did you have a little sideline income and file a Schedule C with your personal returns? Are other aspects of your business and personal life pretty much the same this year as they were last year? If you're currently doing business as an unincorporated sole proprietor or a one-person LLC treated as a "disregarded entity" for tax purposes, you might find doing a return now not much different from how you’ve handled your personal returns in the past.

   Pro-Tax Pro:   You are doing business as a partnership or a corporation. You are now going to be in a whole new tax ocean, confronting forms you may have never seen before: Form 1065, 1120, 1120S, K-1, Schedule L. The list goes on and on. Your previous experience doing your own returns might not help much when it comes to doing one of these business returns.

5. Pro-DIY:   You have a bookkeeper, or worked with a bookkeeper to set up your business record-keeping. You understand balance sheets and concepts like accumulated depreciation and capital contributions.

   Pro-Tax Pro:   Balance sheet? What’s a balance sheet?

6. Pro-DIY:   You've been keeping up with changes in tax laws as they apply to businesses. You know which kinds of assets qualify to be written off in full in the year of purchase, and what expenses need to be deducted over several years. You are familiar with what qualifies as a fully deductible startup expense and what will have to be depreciated over a 15-year period.

   Pro-Tax Pro:   You jump from the entertainment section of the newspaper to the sports section, skipping right over business and finance (and who would blame you?).

Still not sure what’s right for you? Don't be afraid to call a tax pro for a meeting; many tax pros don’t charge for an introductory meeting with a potential client.

About the author   Joseph Anthony is a business-finance writer who has a tax practice in Portland, Ore., specializing in tax preparation and planning for individuals and small businesses. As an Enrolled Agent, he also represents taxpayers in their dealings with the Internal Revenue Service, and regularly speaks on current tax topics and controversies.