just bought a tiny mom&pop market. hire a CPA or do it myself?

Question

Me & my wife bought our first business(a tiny 600 sqft neighborhood market that sells groceries, beer & wine and lottery). We don't have any employees. We just do it ourselves. The market is located in LA county just south of city of Los angeles. Should we hire a CPA to do our taxes and accounting or can we do it ourselves? Is it hard to do it ourselves? Is there a free help online or someplace so that we can do it ourselves? What should be careful about?

Answer 1

Hire a CPA at least once. There are things you may not know about filing sales taxes, what kind of business structure you might want. You will need to depreciate assets,make sure your licenses are current at all times. You will need to track anything your family buys through the business, it will be assumed you eat some merchandise so you will need to pay sales tax if any is due on what your family consumes.

Answer 2

Sounds like you can probably do the accounting yourself.
This is especially true, if you have an scanning inventory system set-up. You may want to consult with another owner-operator small business that will advise you these issues.
Not all CPA's are the same, one that has a large small business client base will be more beneficial to you than one that handles audits/ estate planning and etc.
I am relutant to advise you to see a CPA, because many CPA's will not have the knowledge to provide you will all answers. Quick Books is a very good program that will allow you to your own accounting and the data can be downloaded to many tax programs. There is a bit of a learning curve, but there are some cheap good education programs on how to use it properly. Of course you will need a good computer and printer to get started.
The other option is to find a good bookkeeper that will help you get things set up on the accounting side--and they are often more knowledgeable on small business issues. And they are cheaper than CPA services. Just get some good references on hiring one.
Also, there are some very good inexpensive books on starting a new business on amazon.com.
I wish you the best.

Answer 3

The first thing that you should know is that a CPA isn't for everyone. A CPA is certified to do 'Certified Audits'...this doesn't mean that they know about tax laws. Most of them don't, they just think they do.

I had a great business fixing CPA's and Lawyer's mistakes until I sold it to provide hospice care to my father.

A CPA takes a sixteen hour test with only one section on taxation. An Enrolled Agent takes a sixteen hour test and all of it is taxation.

Now there are some CPA's that specialize in taxation and are very good (but, usually they are Enrolled Agents too).

With that said it depends on your knowledge and abilities if you should try to do it yourself. But, you do not need a CPA...any decent bookkeeper can do the monthly requirements. Then get a tax professional to do the return.

CPA's are expensive....I charge $50 an hour and I am at least three times cheaper than any of the local CPA's. Besides in most cases the CPA doesn't do the actual work unless it is a really involved corporation...they pass it off to someone they hired generally a simple bookkeeper or a student that will be a bookkeeper.

I have been approached by six different CPA's to prepare the tax returns that they sign their name to...I wouldn't do it

But, you do need to talk to someone that knows what they are doing in the tax profession.

Answer 4

If you are asking this question, then you are not ready to "go it alone".

Assuming that you are a sole proprietor, the simplest form of business (You are the biz), you will need to set up your books to keep track of many things, such as: cost of goods sold, operating expenses, sales tax collected, taxable & non-taxable sales.

If you are computer literate, you might want to use software such as Quickbooks to help you keep track of business transactions. If not, you will want to keep your books by hand. (Very Tedious!!).

With no employees you will not have to deal with Payroll taxes and workers' comp. But you will need to file sales tax returns and include Schedules C, SE and possibly other forms with your tax return.

For now I suggest either of 2 approaches, depending on how much you feel comfy with.

Approach #1: Go online to your state's agency for sales tax & read the publication applicable to you. Get an account nuber and review the forms to determine how to set up your books to capture the data you need at the end of the reporting period. Set up your books in a form to captture the data, for example separating taxable from non-taxable sales.

Next, go to IRS. gov & get pub 334. Read the section on Sole Proprietors. Again, you are focussing on the form of keeping data. Include this in your setup of the books.

Finally, pay a pro to review your setup to be sure it will givr oyu the data you need.

Approach #2: If oyu are not aomfy with the above, hier a pro right out of the gate. I agree with the fellow who says you probably do not need to pay for the expertise of a CPA. Get referrals from others with businesses or contact your state's Enrolled Agent Society for a referral.

Good luck!

Answer 5

Hire a CPA to help get you started. Once you have your bookkeeping system up and running you may wish to have him or her look things over once or twice a year and help you get ready for tax time. There's no real need to have a CPA handle all of the bookkeeping work, the cost would be excessive.

Answer 6

We are an accounting firm with clients in over 35% of the US in everytype of tax filed you can imagine and then some. We have prepared taxes and done accounting for most industry types, contractors, retail, wholesale, services, doctors, lawyers, non-profits etc. So we relate the following.

It really does depend on your knowledge of many things in relation to income tax codes and accounting matters. For example, you say you do not have an employee and so you would be considered perhaps a partnership. Then again, you could be classified as a corproation or then again you could be an LLC or an S Corp. and could be employees yourself for example.

Are you well informed for the accounting and tax aspects, are you well informed of the laws and otherwise, inventory etc. surrounding your particular situation.

Things to be careful about, I can save you money yet I have never seen your tax situation.

It will depend what you may need. Many hire accountants to go over books, give ideas, etc and then set up system for them to do it. Some have like our firm online accounting systems so that people can do what they can accountants can do what they can so that no problems relate. For example someone may not be very qualified to adjust accounts and create journal entries to offset problems etc. or otherwise and just pretty much know how to input receipts and checks and such and so such a client would probably be better off to hire someone else to do the rest.

It really depends on many factors so sorry cannot be of more help. But for taxes remember Dr. Einsteins Statement, "The most complex thing there is is the income taxes." Our site by the way has much in the way to help people make decisions and otherwise and has free tax newsletter etc. But many others do the same. http://www.irs.gov is a good link too for tax law and the California Franchise Tax Board would help too. We have links on our site for various matters and you may wish to visit that also.

PS the best tax savings you could have and have a great business is an LLC that is classfied as such under State Law and elects to be treated as an S Corp under Federal Tax Law. Believe us when we say this one. It is the one form that saves you much money. LLC multiple member treated as LLC multiple member default form to file 1065 partnership return, review IRS to see this. Partnership will file 1065 as well. Corp will file 1120. S Corp would file 1120S. I.E. if you had total 10k net profit after all expenses the following would be true. You would be taxed on that for around 1400.00 for the year for any company filing 1065, 1120. If you elected S Corp for example, you would not be taxed that same 1400. Too difficult to explain why this is so but believe this is true.

Do not believe anyone who says they can save you money if they do not know your situation but in the above case this is very true. The only entity type that would not be taxed on the overall net to be claimed on Schedule SE on your personal 1040 tax return is that of the S corp 1120S types. The Corp would be the same but they would pay the tax themselves. Aka the same amount as noted above. All profit and loss for both you and yoru spouse will transfer to your personal return 1040 to the Schedule E as non-passive income under all forms 1120S, 1065. this would show up on the K1's that you would get. There is no other possible form that you could file for the company except that which I have noted based on your type. All various expenses such as Section 179 would also be passed through to you and even miles under most instances and otherwise. Again Corp filing 1120 would not pass to you and you would and spouse be officers of that corp. Aka you would be employees of that corp as you may be under the other ones as well.

What will work best for you is to first determine are you capable of handing these matters without assistance as the penalties will far outweigh in most cases the cost to you if you cannot.

Most people will never need audit assistance. The type of audit that is in-depth that takes days to complee. Many may need audit assistance for payroll or insurance audits but a CPA you do not need to handle this for you. Many companies just do it themselves. Of course most CPA's are expensive an you can expect to pay heavily if so. I worked in a CPA firm that did auditing and we billed a client 17k for a weeks audit one time. This is not uncommon in an in-depth review.

Most people say oh I'm being audited because they received a letter from Treasury for inquiry. And most of them have been resolved merely by a letter or a simple call. Run your business properly and you won't have to worry about these matters. Only those who wish to skirt tax codes will have need to worry.

Our firm services such accounts out of state and we have many in Oregon that we regularly travel to as well as in Utah, and may do so at our rates shown by our site under the links to the left. The questions really are this. Can you do it yourself based on overall knowledge etc.

Some clients need help sometimes, some clients need much help. Some clients would rather concentrate and focus on their companies. Like us do we hire a plumber or do we do it ourselves. Obviously our knowledge is lousy in this area. Do we hire a graphic designer to work for us or do we do it ourselves. I rather spend my time doing what we do best and leave others to do what they do best.

We don't think nor believe overall that your operation would be costing so much to do the work to be honest for any firm even if you did decide to outsource the work but the most important thing about your business is obviously he inventory aspect and maintaining proper controls which I'm sure the old owner's had a system in doing so. Equally the state based lottery that you have as well. I have met many retailers that just all but refused to keep an inventory up to par and within the IRS codes. And I have seen many go out of business because of these matters as well. There are many varieties some choose retail methods which works good for some client that we have, some like lower of cost or market and still others choose hybrid methods. No method works the same for everyone as every situation, when it comes to accounting matters is unique but to be lax in such areas may cost you dearly. It is your company you must decide what is best for you and deal with problems as they arise if you must.

Wayne Barney
President
BC Business Services, Inc.
http://www.bcbsinc.com