Years ago, I came across an article called “Tax Tips for Freelancers”, which quoted an Accountant that said, “you don’t even necessarily have to go to an accountant” to get your taxes done.
I definitely disagree with an article that states people can (and should) do their own taxes. I do believe that you can complete and file your own taxes; HOWEVER:
- How much time are you willing to invest in educating yourself on the tax rules which can change several times each year?
- How much time are you willing to spend dealing with Revenue Canada and figuring out what’s legitimate and what isn’t?
- How much time are you willing to take in determining what’s reasonable?
- How much value do you place on your personal time?
Having a professional accountant look after your taxes can help you with that.
Let’s consider meals and entertainment as an example. If you have $10,000 in meals and entertainment but only made $30,000 in revenue, is that a reasonable deduction? Well, if you ask the layperson, they will probably say no because 1/3 of your revenue does not appear reasonable to claim for meals. BUT, an accountant may have some questions for you like:
- Is it your first year of business?
- How much entertaining do you need to do to grow your business?
- Are you in the business of entertaining?
Every business and every profession will have their differences regarding what business expenses are reasonable. For example, looking at 5 people of the same profession, each individual can choose to grow their business differently. One person might like to entertain their clients and prospects at lunch, dinner, coffee or drinks as opposed to traditional advertising means. Another person may choose do it through more traditional and formal means of advertising; i.e. yellow pages, newspaper ads, online advertisements, Google ads.
Every person will grow their business differently; it’s what makes us all unique as business people and as individuals.
So as I stated before, I do disagree that people can (or should) do their own taxes. The amount of money you save on taxes by using a Professional Accountant will far outweigh what you pay on accountant fees.
And yes, as the article expresses, some Chartered Professional Accountants charge a lot more than others, and some seem to charge extremely low rates. Keep in mind that every business has overhead and theses expenses are not the same for all.
When selecting a Professional Accountant, you don’t want to point at the yellow pages and hope for the best, you want someone with the right education and experience and will be the best resource for you and your business. There might come a time when incorporating is a better option than operating as a sole proprietor. Or maybe you need a Holding Company or a Family Trust. Will your children be going to College and University soon? A Family Trust might be a good tax strategy to help pay for their tuition. Having a Professional Accountant can help you with all that and more.
It all comes down to how much is your time worth? The important factor is finding the value you are comfortable with. Does the Professional Accountant that you approached have the right fit with you?
The author of the article also states: “as somebody who’s so early in their career…I don’t have the money right now to go see an accountant.” I beg to differ – you can’t afford not to. Working with a Professional Accountant who specializes in small business can provide guidance in how to save your receipts, what receipts are deductible, etc.
There is a difference in paying fees for the bookkeeping to be done alongside your taxes and just paying for your taxes to be done. Just as there is a difference in paying a fee for preparing your GST/HST return and separating the tax amounts from your expenses. You have options – to prepare the numbers (revenue and expenses) yourself with the guidance of a professional to save the fees for processing but let the professional do the taxes for you or have a professional prepare the numbers and do the taxes.
The article uses a freelance writer as an example, ergo, if you are a freelance writer, your time is best spent writing and researching articles, traveling to gain the experience that you need to write the articles. That is how you make money and, therefore, that is where your time is best spent.
Paying an accountant a few hundred dollars is probably worth your time and money. Because if you aren’t experienced doing taxes, chances are you will pay more tax in the end. You aren’t going to maximize your claim on expenses that you ARE eligible for, or you may end up claiming too much on deductions that you ARE NOT eligible for. No matter what your business is, your time is best spent doing the work or running the business, not doing your own taxes.
Since I opened my own business, I too, have learned this lesson. I need to find value in other professionals as well. My time is not best spent working on my website; doing my own advertising; fiddling on the computer trying to create my own logo; or managing my own IT. It’s not that I CAN’T do these things…but that I am not an expert in those fields; it does not serve the purpose of my company. I waste too much time and a lot of money. This is time that can be better spent on clients, actually earning money.
I also learned that valuing other professionals will help you value yourself more, especially if you are in a service based industry. Placing value on other professionals will make it easier for you to sell yourself. Because if you don’t value others, it’s really difficult to value yourself in determining what your hourly rate is.
The key here is to find a Professional Accountant. Make sure you have a connection with them and that you find value for the amount you pay and the service you receive. Hiring the “lowest bidder” isn’t necessarily what’s best for you or your company.
***This blog is for information only and not to be used as tax advice or planning without first seeking professional advice. Information is subject to change without notice.