By Larry Armstrong Here's one way to give your business an annual checkup: Do your own taxes. Sure, it's probably easier to take all the paperwork to a professional tax preparer or your certified public accountant. But think about it. Who has to collect and organize all that paperwork? Who has to come up with on-the-spot answers to all the questions about your business? What most tax guys do is fill out the forms and do the math. And to do that, they simply plug your data into their tax software. Then they plug your bill -- $1,000 to $3,000 for most small corporations -- into their accounting software.
Of course, there are going to be times when your taxes are too complicated to fathom yourself, or you don't have time to tackle them. Maybe you just don't have the confidence to file your own return. After all, part of what we pay tax preparers for is their wisdom and experience. Still, consider giving tax software a try: The time you spend working through your finances will go a long way toward preparing you for that interview with your CPA.
If you haven't looked at do-it-yourself tax software for a while, you'll be surprised at how simple and straightforward it has become. I worked my way through a couple of popular tax packages for small businesses, Intuit's (INTU) TurboTax Business and H&R Block's (HRB) TaxCut Business. They start by asking you questions -- more questions, in fact, than your tax professional likely will ask. They have advice screens and short videos to get you over the tough spots such as categorizing expenses. Both can import most of the data required to prepare and file an income tax return from Intuit's Quicken. In addition, TurboTax can automatically fetch the data from QuickBooks, the accounting software that most small businesses use.
The cost is nominal: $80 for TaxCut and $100 for TurboTax. TaxCut throws in free preparation for all of the states where you need to file; TurboTax charges $30 for each of those.
If your company is a sole proprietorship instead of a partnership or corporation, you don't even need business tax software. You'll find all the tax forms you need in the premium versions of TaxCut and TurboTax for individual filers, which sell for $50 and $80, respectively.
As the software walks you through each part of the tax return, you'll review your profit-and-loss statement, the sources of your revenue, and your expenses. You'll also get a look at your balance sheet: That's where you'll see equipment you bought, bank loans outstanding, and credit-card debt.
It's a quick way to get a comprehensive view of your business' financial health. Once you've used the software for a while, it can tip you off to problems by showing year-over-year comparisons. Maybe your expenses have surged, or you're accumulating too much inventory.
By showing the factors that contribute to your taxes, the software can arm you with information you need to make decisions throughout the year. Thinking about spending more on advertising? Not sure whether you should lease or buy your computers? Debating whether to depreciate your car or take the mileage expense? Once you've put your data into the software, you can use your computer to play what-if games based on such questions. And the answer to, "What if I tried to do my own taxes?" might turn out to be more illuminating than you expect.
Larry Armstrong writes about personal technology for BusinessWeek magazine